Binder PM1

BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE, PILANI
WORK INTEGRATED LEARNING PROGRAMMES

Digital
Part A: Content Design

Course Title PROJECT MANAGEMENT
Course No MBA ZG523
Credit Units 4
Credit Model
Content Author Prof Sandeep Kayastha
Course Objectives (CO)

CO-1 To introduce modern concepts in managing projects
CO-2 To introduce methods of doing market, technical and financial analyses for the selection and
prioritization of projects
CO-3 To Introduce techniques of project planning, scheduling and managing risks, and allocation
of responsibilities
Textbook (T)
T-1 Clifford F Grey. Erik W Larson, Gautam V Desai. Project Management. Sixth edition. McGraw
Hill Education (India) Private Limited. New Delhi. 2015.
T-2 Prasanna Chandra. Projects: Planning, Analysis, Selection, Financing, Implementation &
Review. Eighth edition. McGraw Hill Education (India) Private Limited. New Delhi. 2014.
Reference Books
R-1 Kerzner Harold. Project Management. Tenth edition. Wiley. 2013.
Content Structure
1. Modern Project Management

1.1. What is a Project?
1.2. The Project Life Cycle
1.3. The Project Manager
1.4. Drivers of Project Management
1.5. Project Governance
2. Organization Strategy and Project Selection
2.1. Strategic Management Process
2.2. A Portfolio Management System
2.3. Selection Criteria
2.4. Applying a Selection Model
2.5. Managing the Portfolio System
3. Market and Demand Analysis
3.1. Situational Analysis and Specification of Objectives
3.2. Collection of Secondary Information, Conduct of Market Survey
3.3. Demand Forecasting
3.4. Marketing Plan
4. Technical Analysis
4.1. Manufacturing Process / Technology, Technical Arrangements
4.2. Material Inputs and Utilities
4.3. Product Mix
4.4. Plant Capacity, Location and Site, Machineries and Equipment
4.5. Structures and Civil Works
4.6. Environmental Aspects
4.7. Project Charts and layouts
5. Financial Estimates and Projections
5.1. Cost of Project, Means of Finance
5.2. Estimates of Sales and Production
5.3. Cost of Production
5.4. Working Capital Requirement and Financing
5.5. Profitability Projections
5.6. Projected Cash Flow Statement
5.7. Multi-year projections, Financial Modeling Using Spreadsheet
6. Time Value of Money
6.1. Future Value of a Single Amount
6.2. Present Value of a Single Amount
7. Investment Criteria
7.1. Net Present Value
7.2. Benefit-Cost ratio
7.3. Internal Rate of Return
7.4. Payback Period
8. Project Cash Flows
8.1. Elements of Cash Flow Stream, Basic Principles of Cash Flow Estimation
8.2. Cash Flow Illustrations
8.3. Cash Flow for a Replacement Project
9. The Cost of Capital
9.1. Cost of Debt and Preference
9.2. Cost of Equity
9.3. Weighted Average Cost of Capital
10. Organization: Structure and Culture
10.1. Project Management Structures
10.2. Organization Culture
11. Defining the Project
11.1. Project Scope, Priorities, Work Breakdown Structure, Integrating WBS, Coding WBS
11.2. Process Breakdown Structure
11.3. Responsibility Matrices, Project Communication Plan
12. Developing a Project Plan
12.1. Constructing a Project Network, AON (and AOA) Diagram, Network Computation Process
12.2. PERT Calculations, Project Activity Times, Probability of Completion
13. Scheduling Resources and Costs
13.1. Types of Resource Constraints
13.2. Resource Loading
13.3. Resource Leveling
13.4. Resource Allocation
13.5. Heuristics
13.6. Limited Resources
13.7. Multiple Project Resource Schedules
13.8. Multi-Project Environment
13.9. Time Phased Budget Baseline
14. Reducing Project Duration
14.1. Reducing Project Duration
14.2. Options for Accelerating Project Completion
14.3. Project Cost Duration Graphs & Optimization
14.4. Direct and Indirect Costs
14.5. Crash Times
14.6. Decisions on Time and Cost Reductions
14.7. Time Reduction
14.8. Cost Reduction
15. Estimating Project Times and Costs
15.1. Factors influencing Quality of Estimates
15.2. Estimating Guidelines for Times, Costs and Resources
15.3. Top-Down versus Bottom-Up Estimating
15.4. Methods for Estimating Project Times and Costs
15.5. Types of Costs, Refining Estimates
16. Progress and Performance Measurement and Evaluation
16.1. Structure of Project Monitoring and Information Systems
16.2. Project Control Process
16.3. Monitoring Time Performance
16.4. Development of Earned Value Cost/Schedule System
16.5. Developing Status Reports
16.6. Earned Value Analysis
16.7. Indices to Monitor Progress
16.8. Forecasting Final Project Cost
17. Project Risk Management
17.1. Risk Management Process
17.2. Contingency Planning
17.3. Handling Risks
17.4. Contingency Funds and Time Buffers
17.5. Change Control Management
18. Outsourcing: Managing Inter-organizational Relations
18.1. Outsourcing Project Work
18.2. Art of Negotiating
18.3. Contract Management
19. Project Closure
19.1. Types of Project Closure
19.2. Wrap-up Closure Procedure
19.3. Post Implementation Evaluation
20. International Projects
20.1. Environment Factors
20.2. Project Site Selection
20.3. Cross-Cultural Considerations
20.4. Selection and Training for International Projects
21. Project Oversight
21.1. Portfolio Project Management
21.2. Project Office
21.3. Phase Gate Methodology
21.4. Organization Project Management Maturity
Learning Outcomes:
LO-1 The student will be able to apply modern management concepts and principles of project
management in project as well as and non-project driven organizations
L0-2 The students will be able perform required technical and market analysis for new projects
L0-3 The student will be able to prepare projected cash flow statement and balance sheet
L0-4 The student will be able to plan and schedule activities of projects, assign responsibilities and
communication plans
LO-5 The student will be able to Identify Project Risks and prepare contingency plans
Part B: Learning Plan
Academic Term SECOND SEMESTER 2016-17

Course Title PROJECT MANAGEMENT
Course No MBA ZG523
Lead Instructor Prof Sandeep Kayastha
Contact hour 1-2

Type Content Reference Topic Title Study/HW Resource Reference
Pre CH
1.1 to 1.5 Introduction to the course, and
During CH Modern Project Management T1: Chapter-1
1.1 to 1.5 T1: Chapter-1 Review questions and
Post CH Modern Project Management Exercises
Contact hour 3-4

Organization Strategy and Project
Pre CH 2.1 to 2.5 Selection Read T1: Chapter-2
During CH 2.1 to 2.5 Selection T1: Chapter-2
Post CH 2.1 to 2.5 Selection T1: Chapter-2 Questions and Exercises
Contact hour 5-6

Pre CH 3.1 to 3.4 Market and Demand Analysis Read T2: Chapter-4
During CH 3.1 to 3.4 Market and Demand Analysis T2: Chapter-4
Post CH 3.1 to 3.4 Market and Demand Analysis T2: Chapter-4 Questions and Problems
Contact hour 7-8

4.1 to 4.7 Technical Analysis
Pre CH 5.1 to 5.7 Financial Estimates and Projections Read T2: Chapter-5 & 6
4.1 to 4.7 Technical Analysis
During CH 5.1 To 5.7 Financial Estimates and Projections T2: Chapter-5 & 6
4.1 to 4.7 Technical Analysis T2: Chapter-5 & 6 Questions and
Post CH 5.1 to 5.7 Financial Estimates and Projections Problems
Contact hour 9-10

6.1 to 6.2 Time Value of Money, Investment
Pre CH 7.1 to 7.4 Criteria Read T2: Chapter-7 & 8
6.1 to 6.2 Time Value of Money, Investment
During CH 7.1 to 7.4 Criteria T2: Chapter-7
6.1 to 6.2 Time Value of Money, Investment T2: Chapter 7 & 8 Questions and
Post CH 7.1 to 7.4 Criteria Problems
Contact hour 11-12

8.1 to 8.3 Project Cash Flows
Pre CH 9.1 to 9.3 The Cost of Capital Read T2: Chapter-9 & 10
During CH 8.1 to 8.3 Project Cash Flows T2: Chapter-9
9.1 to 9.3 The Cost of Capital
8.1 to 8.3 Project Cash Flows T2: Chapter 9 & 10 Questions and
Post CH 9.1 to 9.3 The Cost of Capital Problems
Contact hour 13-14

Pre CH 10.1 to 10.2 Organization: Structure and Culture Read T1: Chapter-3
During CH 10.1 to 10.2 Organization: Structure and Culture T1: Chapter-3
T1: Chapter-3 Review questions and
Post CH 10.1 to 10.2 Organization: Structure and Culture Exercises
Contact hour 15-16

Pre CH 11.1 to 11.3 Defining the Project Read T1: Chapter-4
During CH 11.1 to 11.3 Defining the Project T1: Chapter-4
Post CH 11.1 to 11.3 Defining the Project Exercises
Contact hour 17-18

Pre CH 12.1 Developing a Project Plan Read T1: Chapter-6
During CH 12.1 Developing a Project Plan T1: Chapter-6
Post CH 12.1 Developing a Project Plan Exercises
Contact hour 19-20

12.2 PERT Calculations
Pre CH 13.1 to 13.9 Scheduling Resources and Costs Read T1: Appendix-7.1 and Chapter-8
12.2 PERT Calculations
During CH 13.1 to 13.9 Scheduling Resources and Costs T1: Appendix-7.1 and Chapter-8
12.2 PERT Calculations T1: Appendix-7.1 and Chapter-8
Post CH 13.1 to 13.9 Scheduling Resources and Costs Review questions and Exercises
Contact hour 21-22

14.1 to 14.8 Reducing Project Duration Estimating
Pre CH 15.1 to 15.5 Project Times and Costs Read Chapter-9 and 5
14.1 to 14.8 Reducing Project Duration Estimating
During CH 15.1 to 15.5 Project Times and Costs Chapter-9 and 5
14.1 to 14.8 Reducing Project Duration Estimating Chapter-9 and 5 Review questions and
Post CH 15.1 to 15.5 Project Times and Costs Exercises
Contact hour 23-24

Progress and Performance
Pre CH 16.1 to 16.8 Measurement and Evaluation Read T1: Chapter-13
Progress and Performance
During CH 16.1 to 16.8 Measurement and Evaluation T1: Chapter-13
Progress and Performance T1: Chapter13 Review questions and
Post CH 16.1 to 16.8 Measurement and Evaluation Exercises
Contact hour 25-26
Pre CH 17.1 to 17.5 Managing Risk Read T1: Chapter-7
During CH 17.1 to 17.5 Managing Risk T1: Chapter-7
Post CH 17.1 to 17.5 Managing Risk Exercises
Contact hour 27-28

Pre CH 18.1 to 18.3 Outsourcing & Contract Management Read T1: Chapter-12
During CH 18.1 to 18.3 Outsourcing & Contract Management T1: Chapter-12
Post CH 18.1 to 18.3 Outsourcing & Contract Management Exercises
Contact hour 29-30

Pre CH 19.1 to 19.3 Project Closure Read T1: Chapter-14
During CH 19.1 to 19.3 Project Closure T1: Chapter-14
Post CH 19.1 to 19.3 Project Closure Exercises
Contact hour 31-32

20.1 to 20.4 International Projects
Pre CH 21.1 to 21.4 Project Oversight Read T1: Chapter-15 & 16
20.1 to 20.4 International Projects
During CH 21.1 to 21.4 Project Oversight T1: Chapter-15 & 16
20.1 to 20.4 International Projects T1: Chapter 15- &16 Review questions
Post CH 21.1 to 21.4 Project Oversight and Exercises
Evaluation Scheme:
Legend: EC = Evaluation Component; AN = After Noon Session; FN = Fore Noon Session
No Name Type Duration Weight Day, Date, Session, Time
EC-1 Quiz-I/ Assignment-I Online - 5% September 1-10, 2016
Quiz-II 5% October 1-10, 2016
Experiential 15% To be announced
Learning
EC-2 Mid-Semester Test Closed 2 hours 30% 25/09/2016 (AN) 2 PM 4 PM
Book
EC-3 Comprehensive Open 3 hours 45% 06/11/2016 (AN) 2 PM 5 PM
Exam Book
Syllabus for Mid-Semester Exam (Closed Book): Topics covered in Contact hours 1 to 16
Syllabus for Comprehensive Exam (Open Book): All topics covered in Contact hours 1 to 32
Important links and information:
Elearn portal: https://elearn.bits-pilani.ac.in

Students are expected to visit the Elearn portal on a regular basis and stay up to date with the latest
announcements and deadlines.
Contact sessions: Students should attend the online lectures as per the schedule provided on the Elearn portal.
Evaluation Guidelines:
1. EC-1 consists of either two Assignments or three Quizzes. Students will attempt them through the
course pages on the Elearn portal. Announcements will be made on the portal, in a timely manner.
2. For Closed Book tests: No books or reference material of any kind will be permitted.
3. For Open Book exams: Use of books and any printed / written reference material (filed or bound) is
permitted. However, loose sheets of paper will not be allowed. Use of calculators is permitted in all
exams. Laptops/Mobiles of any kind are not allowed. Exchange of any material is not allowed.
4. If a student is unable to appear for the Regular Test/Exam due to genuine exigencies, the student should
follow the procedure to apply for the Make-Up Test/Exam which will be made available on the Elearn
portal. The Make-Up Test/Exam will be conducted only at selected exam centres on the dates to be
announced later.
It shall be the responsibility of the individual student to be regular in maintaining the self study schedule as
given in the course handout, attend the online lectures, and take all the prescribed evaluation components such
as Assignment/Quiz, Mid-Semester Test and Comprehensive Exam according to the evaluation scheme
provided in the handout.
On Taxila
Course handout- already available
Videos of the Lectures- after the Lecture
Lecture PPTs PPTs Planned (2 hours before the start of the session)
and PPTs Used (after the Lecture).
Project
Quiz- 1 and 2 will be held online.
Management
Post your messages, and use discussion forum. COURSE CODE: MBA ZG-523
LECTURE-1
24 JULY 2016, SUNDAY, 4-6 PM
FACULTY: SANDEEP KAYASTHA, AT HYDERABAD
MBAZG 523 PJM BITS-PILANI 24JUL2016 SUN 6-8 PM 3 MBAZG 523 PJM BITS-PILANI 24JUL2016 SUN 6-8 PM 1
PPTs Textbooks
PPTs will be used in all sessions. This course has two textbooks.
The PPT Planned to be used during the lecture will be made
available 2 hours before the session starts. Project Management by
Clifford F Grey. Erik W Larson, Gautam V Desai. Sixth
After the session the PPT Used will be posted- there could be minor edition. McGraw Hill Education (India) Private Limited.
New Delhi. 2015.
difference between the PPT Planned and the PPT Used because I
may not be able to use all the slides of PPT Planned.
Both kinds of slides be made available in Taxila.
Some of the material that I may use will not be available in the Projects by
textbook, but I find them useful. Such slides are marked- Not in Prasanna Chandra. Eighth edition. McGraw Hill.
Textbook (NITB)
NITB
You would need to buy both textbooks.
During the Lecture Excel software
While the lecture is in progress, use the Chat feature in WebEx to post Excel software will be used in Financial Analysis and Project Planning.
your comments, queries and doubts. Use only Chat- do not use Raise
Hand or other options. I will use MS EXCEL 2014. Older versions will suffice.
Keep the textbook with you during the lecture.
Type on chat now Project Management Software

Company, Designation, Total experience in years, Education MS Project software will be introduced during project planning
Qualifications, and your City. sessions.
You can either buy the software or download free 60-day trail version
from Microsoft website. If you plan to download the trail version,
For example- download in early/mid September so that it can be used throughout the
ONGC/Asst Mgr/9 yrs/ElectricalEngg/Mumbai Semester.
TataMotors/SeniorEngineer/6 yrs/MechnicalEngg/Pune
There will not be any questions in the examinations that will require
you to use the MS Project software.
Course objectives
1. Project management concepts
Project 2.
3.
Methods of doing market, technical and financial analyses for the
selection and prioritization of projects
Techniques of project planning, scheduling and managing risks, and
Management 4.
allocation of resources and responsibilities
MS Excel and MS Project software to solve project management
problems
CHAPTER-1
TEXTBOOK- PROJECT MANAGEMENT GREY. LARSON,
AND DESAI
Project Management textbook

chapters Evaluations
Two quiz- weightage (2*5%)- 10%
Quiz-1 & Quiz-2
Multiple choice questions- 25 questions in each.
Online on Taxlia.
Experiential Learning- 15%.

Assignments
Mid Semester Examination- weightage-30%.

Syllabus- first 8 sessions.
Pen and paper exam.
End Semester Examination- weightage- 45%.

Syllabus- all 16 sessions
Pen and paper exam. Open book.
Projects within organisations Projects
Software implementation- ERP, CRM Roads/Power Plants/Highways/Township
Software development- for HR, Accounts, Maintenance Olympics/Commonwealth games

New product development/product launch
Software Installation- antivirus
Satellite construction/ Satellite launch
Training programs- ISO, Java
Software development
Product launch function/Office events
Consulting- Management/Engineering consulting
Dealers/Suppliers meet Effecting merger of companies
New plants, Extension of a building, Renovation of Making a movie
showrooms
Population census/Elections
Project classification Project companies

Industry PwC, KPMG, E&Y, Bain & Co, ABC
Aerospace, Consulting, IT, Government, Irrigation .. Architects
Size Software companies
Township, house Construction companies- L&T projects
Application Interior
Research, Design, Development, Testing, Construction,
Consultants
Erection
Project life cycle Projects vs Operations
Four stages Projects Operations
Defining One Time Ongoing

Unique activities Repetitive activities
Planning Involves only Cost Involve both costs and revenues
Fixed duration Ongoing
Executing
New budget Modifications of last periods
Closing budget
Temporary resources, people, Permanent resources, people,
systems and procedures systems and procedures
Project Life Cycle What is a Project?

Project defined
A complex, non-routine, one-time effort limited by time, budget,
resources, and performance specifications designed to meet
customer needs.
Notable characteristics of a project

Has an established objective.
Has a defined life span with a beginning and an end.
Requires across-the-organizational participation.
Involves doing most things/ something never been done before.
Has specific time, cost, and performance requirements.
Efforts of different professionals
Project manager attributes over Project Life Cycle
Versatilist
Specialist
Testers
Generalist PMs
NITB Programmers
NITB
Art
The Project Life Cycle as used by a

company for new product development
Phases that all projects go through from inception to
completion
DESIGN PDR
End of PPTs Used
DEVELOPMENT CDR
FABRICATION
INTEGRATION
OPERATION
FRR TESTING NITB

Project Lifecycle : Example US - DOD 5000.2
Extra slides- Not used in the Lecture

but you may find them useful
NITB
Construction Project Lifecycle Pharmaceuticals Project Lifecycle
NITB
NITB
Lifecycle: Phases
Project
Management
COURSE CODE: MBA ZG-523
L E C T U R E - 2 , 6 A U G U S T 2 0 1 6 S AT U R D AY, 4 - 6 P M
FA C U LT Y: S A N D E E P K AYA S T H A , AT H Y D E R A B A D
NITB
MBAZG 523 PJM BITS-PILANI 24JUL2016 SUN 6-8 PM 129
Project
Management End
CHAPTER-1 CONTINUED
TEXTBOOK- PROJECT MANAGEMENT GREY. LARSON,
AND DESAI
MBAZG 523 PJM BITS-PILANI 6AUG2016 SAT 4-6 PM 2 MBAZG 523 PJM BITS-PILANI 24JUL2016 SUN 6-8 PM 130
Project manager duties Project manager attributes
Reports to senior management
Communicates with users
Plans and schedules
Versatilist
Obtains and allocates resources
Specialist
Controls risks
Manages people
Coordinates
Implements quality assurance
Controls the budget
Delivers results Generalist
NITB
MBAZG 523 PJM BITS-PILANI 6AUG2016 SAT 4-6 PM 5 MBAZG 523 PJM BITS-PILANI 24JUL2016 SUN 6-8 PM 13
The Project Manager

Manages temporary, non-repetitive activities and
frequently acts independently of the formal organization.
Marshals resources for the project.
Is linked directly to the customer interface.
NITB Provides direction, coordination, and integration
to the project team.
Is responsible for performance and success of the project.
Must induce the right people at the right time to address

the right issues and make the right decisions.
MBAZG 523 PJM BITS-PILANI 6AUG2016 SAT 4-6 PM 16 MBAZG 523 PJM BITS-PILANI 6AUG2016 SAT 4-6 PM 4
Which projects to undertake;
how to select projects?
Projects in an organization Organization
Operations- capacity expansion, automation, layout change, supplier
training, new production line
R&D- new products, product enhancement
strategy and
Marketing- 200 new stores in 300 days, CRM implementation
IT: ERP, hardware upgradation, software upgradation
Maintenance- equipment replacement
Project Selection
CHAPTER-2
HR- HR software, e-learning software
Business development- new plants, acquisition TEXTBOOK- PROJECT MANAGEMENT GREY. LARSON,
AND DESAI
Finance- close down unviable projects
An integrative approach Project Management textbook

Integration (or centralization) of project management provides senior
management with:
An overview of all project management activities
A big picture of how organizational resources are used
A risk assessment of their portfolio of projects
A rough metric of the firms improvement in managing projects relative to
others in the industry
Linkages of senior management with actual project execution management
MBAZG 523 PJM BITS-PILANI 6AUG2016 SAT 4-6 PM 10 MBAZG 523 PJM BITS-PILANI
28 6AUG2016 SAT 4-6 PM
Strategy Integrated management of projects
Corporate strategy
Deals with the entire company, which may consist of several units
Technology driven, Global player, conglomerate, organic growth or growth through
mergers and acquisitions, Industrial products, Revenue from innovation- 3M, GE- be
in top 3
Business strategy
Deals with a particular business unit
Products to projects- pumps to irrigation systems, Gensets to
backup power supply systems, IBM
Strategic management
process: an overview Strategy
Aligning with strategy-
Requires every project to be clearly linked to strategy.
Provides theme and focus of firms future direction.
Responding to changes in the external environmentenvironmental
scanning
Allocating scarce resources of the firm to improve its competitive
positioninternal responses to new programs
Project portfolio Strategic
management
Management
Process
215 6AUG2016 SAT 4-6 PM
A portfolio management system Projects and strategy

Design of a project portfolio system: If projects are not aligned with the strategy-
Classification of a project Focusing on problems or solutions with low strategic priority.
Selection criteria depending upon classification Overemphasizing technology that results in projects that pursue
Sources of proposals exotic technology that does not fit the strategy or customer need
Evaluating proposals Engaging in a never-ending search for perfection only the project
team really cares about.
Managing the portfolio of projects.
Types of projects
Compliance + Must-do + Emergency
Environmental, Plant lost in fire/flood
Operational
Hardware upgradation, machine replacement
Classification of a
Strategic
New plants, new products, new geographies project
Balancing the portfolio for

risks Portfolio of projects by type
Bread-and-butter Projects
Involve evolutionary improvements
to current products and services.
Pearls
Represent revolutionary commercial opportunities using proven
technical advances.
Oysters
Involve technological breakthroughs with high commercial payoffs.
White Elephants
Showed promise at one time but are no longer viable.
FIGURE 2.2
220 6AUG2016 SAT 4-6 PM
Benefits of portfolio
Selection criteria management
Financial models: Payback period, Net Present Value (NPV), Cost Benefit Builds discipline into the project selection process.
Ratio (CBR), Internal Rate of Return (IRR)
Financial benefits > Financial costs
Links project selection to strategic metrics.
Will be covered in depth later in Financial Analysis topic. Prioritizes project proposals across a common set of criteria, rather
than on politics or emotion.
Allocates resources to projects that align with strategic direction.
Non-financial models: projects of strategic importance to the firm.
Checklist Model Balances risk across all projects.
Multi-Weighted Scoring Model Justifies killing projects that do not support strategy.
Improves communication and supports agreement on project goals.
EXHIBIT 2.2
Non-financial strategic criteria

Capture larger market share, Make it difficult for competitors to enter the
market
To develop an enabler product, which by its introduction will increase sales
in more profitable products
To develop core technology that will be used in next-generation products
To reduce dependency on unreliable suppliers
To prevent government intervention and regulation
Selection Criteria
To restore corporate image or enhance brand recognition
To demonstrate its commitment to corporate citizenship and support for
community development.
Checklist model Multi-criteria selection models
Checklist Model Checklist Model
Uses a list of questions to review potential projects and to determine their Uses a list of questions to review potential projects and to determine their
acceptance or rejection. acceptance or rejection.
Fails to answer the relative importance or value of a potential project and Fails to answer the relative importance or value of a potential project and
doesnt to allow for comparison with other potential projects. doesnt to allow for comparison with other potential projects.
Multi-Weighted Scoring Model
Uses several weighted qualitative and/or quantitative selection criteria to
evaluate project proposals.
Allows for comparison of projects with other potential projects
Sample questions in checklist method-1

Topic Question
Strategy/alignment What specific strategy does this project align with?
Driver What business problem does the project solve?
Success metrics How will we measure success?
Sponsorship
Risk
Risk
Who is the project sponsor?
What is the impact of not doing this project?
What is the project risk to our organization?

Checklist model
Risk Where does the proposed project fit in our risk profile?
Benefits, value, ROI What is the value of the project to this organization?
Benefits, value, ROI When will the project show results?
Objectives What are the project objectives?
Project screening matrix Sample questions checklist method-2
Topic Question
Organization culture Is our organization culture right for this type of project?
Resources Will internal resources be available for this project?
Approach Will we build or buy?
Schedule How long will this project take?
Schedule Is the time line realistic?
Training/resources Will staff training be required?
Finance/portfolio What is the estimated cost of the project?
Portfolio Is this a new initiative or part of an existing initiative?
Portfolio How does this project interact with current projects?
Technology Is the technology available or new?
Applying selection models

Project Classification
Deciding how well a strategic or operations project fits the organizations
strategy.
Selecting a Model
Multi-weighted
Applying a weighted scoring model to align projects closer with the
organizations strategic goals.
Reduces the number of wasteful projects
selection model
Helps identify proper goals for projects
Helps everyone involved understand how and why a project is selected
Sources of
A Proposal Form for an
proposals
Automatic Vehicular
Tracking (AVL) Public
Transportation Project
MBAZG 523 PJM BITS-PILANI

237 6AUG2016 SAT 4-6 PM MBAZG 523 PJM BITS-PILANI 6AUG2016 SAT 4-6 PM 135
Project proposals
Sources and Solicitation of Project Proposals
Within the organization
Request for proposal (RFP) from external sources (contractors and vendors)
Ranking Proposals and Selection of Projects

Prioritizing requires discipline, accountability, responsibility, constraints, reduced
flexibility,
Risk Analysis and loss of power.
for
500-Acre Wind Managing the Portfolio
Farm Senior management input
The priority team (project office) responsibilities

238 6AUG2016 SAT 4-6 PM MBAZG 523 PJM BITS-PILANI 6AUG2016 SAT 4-6 PM 136
Project
Managing the portfolio system Screening Process
Senior Management Input
Provide guidance in selecting criteria that are aligned with the organizations
strategic goals
Decide how to balance available resources among current projects
The Governance Team Responsibilities
Publish the priority of every project
Ensure that the project selection process is open and free of power politics.
Reassess the organizations goals and priorities
Evaluate the progress of current projects
This PPT is planned to be used.

The PPT that will be used will
be available after the Lecture Priority
and this PPT will be taken-off Analysis
from Taxila
NITB
240 6AUG2016 SAT 4-6 PM
Market & Technical Analysis
Market analysis
(Revenue)
Project
Management
Financial Analysis To undertake the
(Profitability) project or not?
Technical analysis
(Cost and Mgt) COURSE CODE: MBA ZG523
L E C T U R E - 3 , 7 A U G U S T 2 0 1 6 S U N D AY, 4 - 6 P M
7Aug 2016 Sunday. 4-6 pm MBA ZG523 PJM LECTURE-3 BITS-PILANI 4
Market and Technical Analysis

Required by
Promoters
Investors
Lenders- Banks, Financial Institutions
Market &
Demand Analysis
TEXTBOOK # 2 : PROJECTS BY PRASANNA CHANDRA
Chapter 4: Market and Demand Analysis
Chapter 5: Technical Analysis
7Aug 2016 Sunday. 4-6 pm MBA ZG523 PJM LECTURE-3 BITS-PILANI 5 7Aug 2016 Sunday. 4-6 pm MBA ZG523 PJM LECTURE-3 BITS-PILANI 3
Market research/Survey Market Analysis
Demand, growth rate Market size, Aggregate demand, growth
Market segments Profitability and Market shares of competitors
Price elasticity Own market share target
Regions/segments uncovered Customers- Market segment to be targeted
Balance sheets of competitors Substitutes
Intermediaries
Market analysis- sources of

Forecasting methods data
Jury of Executive opinion Market research/Survey
Delphi method
Consulting companies
Historical numerical data
Trend projection Published data
Straight line
Exponential smoothing Government: statistical abstract, SIAM
Moving average Industry: rubber, cement, steel, automobiles, banks, CMIE
Chain-rule method
Consumption-level method
End-use method
Diffusion method
Leading indicator
Econometrics
Time Series projection
methods Jury of Executive Opinion
Moving average method Opinion of the experts is sought.
Average of last N periods sales is used to make forecast for the next period
Executives discuss various views, opinions and scenarios.
Exponential smoothing method
Last 1 period sales is used to make forecast for the next period based on
weightage given to correction in previous forecast errors. Characteristics of Jury of Executive Opinion
Quick method
Trend projection methods
Experts may not agree
Trend (linear/non-linear) is fitted to historical sales and the trend is
extended to make forecasts Experts may not be correct
Can also be used for new kinds of projects, which has no history
Moving Average, MA Delphi method

A questionnaire is sent to experts- what would be demand and why do
MA(N) = Average of last N periods you believe so.
MA(4) = Average of last 4 periods
Based on the response, revised questionnaire is sent until the
MA(7) = Average of last 7 periods projections of the experts converge.
Anonymity is maintained
MA is used
When past data has wild fluctuations, like stock market data
MA Characteristics of Delphi method
MA smoothens the data. It removes noise and captures the signal Face to face meeting is avoided. Personality of the expert does not affect
Larger the period N, more noise is removed others assessment and opinions
Shorter the period N, less noise is removed Experts may not be correct
Trend projection data Moving Average
Generally used for annual data MA
Year Sales (4) MA(6)
Broad trend (increasing/decreasing sales) is estimated and extended 1 28.00 37.00
for making forecasts. 2 29.00

35.00
3 28.50
4 31.00
5 34.20 29.1 33.00
6 32.70 30.7
7 33.50 31.6 30.6 31.00
8 31.80 32.9 31.5

9 31.90 33.1 32.0 29.00
10 34.30 32.5 32.5

11 35.20 32.9 33.1 27.00
12 36.00 33.3 33.2

13 34.4 33.8 25.00
1 2 3 4 5 6 7 8 9 10 11 12 13
Sales MA (4) MA(6)
Trend projection Exponential smoothing

Steps for Trend projection Moving average gives equal weightage of past N observations
1. Plot the historical data
Exponential smoothing gives more weightage to recent data
2. Fit a simple line to the data (straight line, curved line)
3. If the fit is good, extend the line to make the forecast
F(t): Forecast for period t, X(t) actual value in period t.
F(t+1) = F(t) + * (F(t)-X(t))

is smoothing constant, between 0 and 1
closer to 1 means more weightage to recent data
Forecasting demand Trend
projection
Excel File for Moving Average and X Y 30
Year Demand
Deamnd (Thousand units)

25
1993 10
Trend Projection available on Taxila 1994
1995
13
14
20
15
1996 17 10
1997 18 5
1998 18
0
1999 19 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
2000 20
2001 22
2002 23 b = ( XY n X Y)/ ( X*X n X X) b = 1.05
2003 22 a = -2085.75
2004 24 a = Y b X
2005 24 n = number of observations, 14,
Y = -2085.75 + 1.05 * Year
2006 25 Y= average of Y,
X=average of X
Few types of trends Trend Line- Fitted

Demand
Straight line, y= a + b *t Year (X) (Y) XY X^2
When sales grow/decline by b units/period 1993 10 19930 3972049
1994 13 25922 3976036
1995 14 27930 3980025
Exponential, y = a exp(b*t) 1996 17 33932 3984016
When sales grow/decline by b%/period 1997 18 35946 3988009
1998 18 35964 3992004
1999 19 37981 3996001
Straight line with cycles, y = a + b *t + c * Sin(d*t) 2000 20 40000 4000000
When sales grow/decline by b units/period and sales have seasonality 2001
2002
22
23
44022
46046
4004001
4008004
2003 22 44066 4012009
Polynomial, y = a + b * t + c * t*t*t + d * t*t*t*t 2004 24 48096 4016016
2005 24 48120 4020025
2006 25 50150 4024036 b = ( XY n X Y)/ ( X*X n X X)
Sum 27993 269 538105 55972231
Average 1999.50 19.21 a = Y b X
b= 1.0527
a= -2085.75 n = number of observations, 14,
Y= average of Y,
Forecast 2007 27.11 X=average of X
Forecast 2008 28.16
Chain ratio method
Stage-wise factors determining or contributing to demand
Project Example: Market for English dictionaries by school children
Management Population
(10,000,000)
Children
(35%)
School going
(70%)
Study in
English
medium (20%)
Proportion using
dictionaries (5%)
COURSE CODE: MBA ZG523
L E C T U R E - 3 , 7 A U G U S T 2 0 1 6 S U N D AY, 4 - 6 P M
Market size = 10,000,000 *0.35 *0.70 * 0.20 * 0.05
FA C U LT Y: S A N D E E P K AYA S T H A , AT H Y D E R A B A D = 245
This PPT is planned to be used.

Market & The PPT that will be used will
be available after the Lecture
Demand Analysis and this PPT will be taken-off
from Taxila
TEXTBOOK # 2 : P ROJ EC TS BY P R A S ANNA C H A N D R A
Chapter 4: Market and Demand Analysis
Continued from last lecture
NITB
Trend projection Trend projection data
Steps for Trend projection Generally used for annual data
1. Plot the historical data
Broad trend (increasing/decreasing sales) is estimated and extended
2. Fit a simple line to the data (straight line, curved line) for making forecasts.
3. If the fit is good, extend the line to make the forecast
Forecasting demand Trend

projection
Excel file Forecasting.xls for
X Y 30
Year Demand
Deamnd (Thousand units)
25
1993 10
1994
1995
13
14
20
15
Moving Average, Exponential
1996
1997
17
18
10
5
Smoothing and Trend Projection
1998
1999
18
19
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
available on Taxila.
Year
2000 20
2001 22
2002 23 b = ( XY n X Y)/ ( X*X n X X) b = 1.05
2003 22 a = -2085.75
2004 24 a = Y b X
2005 24 n = number of observations, 14,
Y = -2085.75 + 1.05 * Year
2006 25 Y= average of Y,
X=average of X
Exponential smoothing Trend Line- Fitted
Demand
Moving average gives equal weightage of past N observations Year (X) (Y) XY X^2
1993 10 19930 3972049
Exponential smoothing gives more weightage to recent data 1994 13 25922 3976036
1995 14 27930 3980025
1996 17 33932 3984016
1997 18 35946 3988009
1998 18 35964 3992004
F(t): Forecast for period t, X(t) actual value in period t. 1999 19 37981 3996001
2000 20 40000 4000000
2001 22 44022 4004001
2002 23 46046 4008004
2003 22 44066 4012009
F(t+1) = F(t) + * (F(t)-X(t)) 2004 24 48096 4016016
2005 24 48120 4020025
is smoothing constant, between 0 and 1 2006 25 50150 4024036 b = ( XY n X Y)/ ( X*X n X X)
closer to 1 means more weightage to recent data Sum 27993
Average 1999.50
269
19.21
538105 55972231
a = Y b X
b= 1.0527
a= -2085.75 n = number of observations, 14,
Y= average of Y,
Forecast 2007 27.11 X=average of X
Forecast 2008 28.16
Exponential smoothing
method Few types of trends
Forecast next period = Forecast last period + Smoothing parameter * Error Straight line, y= a + b *t
When sales grow/decline by b units/period
Ft+1 = Ft + *et
Exponential, y = a exp(b*t)
= Smoothing parameter, 0 <= <= 1 When sales grow/decline by b%/period
Straight line with cycles, y = a + b *t + c * Sin(d*t)

et = actual valuet forecast valuet When sales grow/decline by b units/period and sales have seasonality
Choose that minimises Mean Squared Error (MSE) of past forecasts Polynomial, y = a + b * t + c * t*t*t + d * t*t*t*t
gives weightage to the past error, to correct the error.
Exponential smoothing-
Consumption Level Method Example from textbook
Income elasticity of demand alpha =0.2 alpha=0.4
Period Sales F(t), 0.2 Error^2 F(t), 0.4 Error^2
Price elasticity of demand 1 28.00 29.00 1.000 29 1.0
2 29.00 28.80 0.040 28.60 0.2
3 28.50 28.84 0.116 28.76 0.1
4 31.00 28.77 4.964 28.66 5.5
5 34.20 29.22 24.824 29.59 21.2
6 32.70 30.21 6.180 31.44 1.6
7 33.50 30.71 7.777 31.94 2.4
8 31.80 31.27 0.282 32.57 0.6
9 31.90 31.38 0.275 32.26 0.1
10 34.30 31.48 7.951 32.12 4.8
11 35.20 32.04 9.959 32.99 4.9
12 32.68 33.87
Mean, MSE 5.761 3.849
F(1)=29.00 is assumed
Income elasticity of demand Chain ratio method

Income elasticity = % change in demand/% change in income
= (Q2-Q1)/(I2-I1) * (I2+I1)/(Q2+Q1)
Stage-wise factors determining or contributing to demand
Example Example: Market for English dictionaries by school children

In Year 1: Demand Q1 = 50 units and Income I1 = Rs 1,000
Population Children School going Study in Proportion using
In Year 2: Demand Q2 = 55 units and income I2 = Rs 1,020 (10,000,000) (35%) (70%)
English dictionaries (5%)
medium (20%)
Income elasticity
Market size = 10,000,000 *0.35 *0.70 * 0.20 * 0.05
= (55-50)/(1020-1000)*(1020+1000)/(55+50) = 4.81 = 245
It means 1% change in income increases demand by 4.81%
S Curve Price elasticity of demand
Price elasticity = % change in demand/% change in price
= (Q2-Q1)/(P2-P1) * (P2+P1)/(Q2+Q1)
Example
Market In Year 1: Demand Q1= 10,000 units and Price P1 = Rs 600
In Year 2: Demand Q2 = 9,000 units and Price P2 = Rs 800
Price elasticity
= (9000-10000)/(800-600) * (800+600)/(9000+10000) = - 0.37
time
It means 1% increase in price decreases demand by 0.37%
Leading indicators Bass Diffusion method

Markets that show very low sales in the beginning, very high sales in the
next stage, and then slows down due to maturity
S type curve
For new kinds of products and technologies
Sales is seen as interaction between those having and not having the
product.
Linear approximation equation for forecasting sales-
nt = p * N0 + (q-p) * Nt-1 + q/N * (Nt-1)2
p- coefficient of innovation, q- coefficient of imitation, nt- sales in period t,
N potential size of market, Nt accumulative sales made till period t.
Leading indicators methods
Sales of cars leads (precedes) car spare parts sales
Births leads school admissions
Good rains leads high production and lower prices
Increase in stock market price may indicate higher expected sales,
Technical Analysis profitability, etc.

Sales of capital goods leads production of consumer goods
TEXTBOOK # 2 : P ROJ EC TS BY P R A S ANNA C H A N D R A New hiring leads consumption, sales of laptops

Identify the leading indicator(s) and use it to make forecasts
Econometric method
Cause and Effect: Sales is function of macroeconomic variable such
as GDP growth, government investments, etc
Example:
Technical Analysis Sales = a * GDP growth + b * Government Expenditure
a and b are estimated from historical data of Sales, GDP growth and
Government expenditure
Based on the forecast for GDP growth and Government expenditure,
sales are estimated using above equation
Topics Technical analysis
1. Outlays (spending) and Financing (raising financial resources) Plant capacity, Product mix
Technology choice
2. Projected Revenue and Costs Technical arrangements
Machinery and equipment
3. Projected Profit and Loss Structure and civil works
4. Projected Cash Flow Material inputs and utilities
Raw material
5. Projected Balance Sheet Infrastructure
Labour
6. NPV concept Costs
Government policies
7. Using NPV of projected cash flows for project selection Climatic, pollution, living conditions
Environment aspects
Project charts and layouts
Schedule of project implementation
15 Feb 2016, Tuesday. 5-7 pm BITS-PILANI 26 7Aug 2016 Sunday. 4-6 pm MBA ZG523 PJM LECTURE-3 BITS-PILANI 24
Project cost =
Land, Site Development, Buildings, Civil works +
Plant and Machinery +
Licensing/Know-how, Engineering, Consulting and legal charges +
Pre-operative expenses +
Margin Money for working capital (25% of one month worth of raw
materials, wages, and electricity, etc + WIP)
Financial Analysis
Chapter 6: Estimates and Projections
9 Feb 2016, Tuesday. 5-7 pm BITS-PILANI 27 7Aug 2016 Sunday. 4-6 pm MBA ZG523 PJM LECTURE-3 BITS-PILANI 25
Projected Revenue Working capital=
Year 1 2 3 4 5 N Capital required to run the operations. Incurred every
month
Sales (Units) q1 q2 q3 q4 q5 qN
Raw material +
Price (Rs/unit) p1 p2 p3 p4 p5 pN Wages and salaries +
Revenue (Rs) R1 R2 R3 R4 R5 RN Utilities +
Repair and Maintenance +
Revenue = Sales * Price Sales expenses +
WIP =
Finished goods inventory +
Taxes
Revenues to be computed for sales of all products and services.
15 Feb 2016, Tuesday. 5-7 pm BITS-PILANI 30 9 Feb 2016, Tuesday. 5-7 pm BITS-PILANI 28
Estimation of operation costs Means of Finance =

Cost of production = Share capital- (by promoters & investors) +
Materials + Long term loans- (by banks) +
Labour & Wages + Deferred payment for land, machinery, supplies (by suppliers) +
Utilities: Power, water + Incentives from government (by government)
Services- security, housekeeping, landscaping +
Sales costs- advertising + promotion Project Cost = Means of Finance
Overheads- Taxes, rent, insurance, Repair & Maintenance
Projected cash flow Outlays and Financing
Year-0 Year-1 Year-2
Projected Cash Flow Year-0 Year-1 Year-2
Sources of Funds Outlays (per year) For-
Share issue 10 15 Given Preliminary and pre-operative expenses 2 Project Implementation agency
Profit Before tax and Interest added back -2 17.2 PBT + Interest
Depreciation provision 2 2.8 Given
Fixed assets 20 20 10 Land, Building, Machinery
Increase in secured medium and long-term borrowings 15 15 7.5 Given Current assets 20 10 RM + WIP +FG inventory +Cash
Increase in bank borrowing for working capital 12 6 Given
Total 25 42 33.5 Total of above rows Financing (per year) From-
Share Capital 10 15 Promoters & Investors
Disposition of funds Term Loan 15 15 7.5 Banks
Capital expenditure for the project 20 20 10 Given
Short term bank borrowing 12 6 Banks
Increase in current assets 20 10 Given
interest 4.8 6.4 Given
Preliminary and operative expenses 2 0 0 Given
Taxes 0 0 2.4 From Profit and Loss, row 7 All values are given.
Total 22 44.8 28.8 Total of above rows
Opening balance of cash 0 3 0.2 Closing cash of previous year
Total Projected cash flow Total
Net surplus/deficit 3 -2.8 4.7 Disposition of funds
closing balance of cash in hand and at bank 3 0.2 4.9 Opening cash + Net surplus/deficit
Projected Revenue & Costs,

Projected Balance Sheet and Projected profit and loss
Year-0 Year-1 Year-2 Projected Revenue and Costs (per year)
Projected Balance Sheet Sales 30 60 =revenue*price
Liabilities Cost of Goods Sold 30 40 =RM+Labour+utilities+Mkt costs+
Share capital 10 25 25 Add (subtract) to last year, values given
Interest 4.8 6.4 Given: based on loans taken
reserves and surplus 0 0 1.6 Add (subtract) Profit after tax
Depreciation 2 2.8 Given: depreciation of assets
secured loan 0 0 0 Add (subtract) to last yaer, values given
term loan 15 30 37.5 Add (subtract) to last year, values given
Projected profit and loss (per year)
short term bank borrowing 12 18 Add (subtract) to last year, values given
Sales 1 30 60 from above
Total 25 67 82.1 Cost of Goods Sold 2 30 40 from above
Interest 3 4.8 6.4 from above
Assets Depreciation 4 2 2.8 from above
fixed assets 20 38 45.2 FA added - depreciation
Losses absorbed 5 0 6.8 from row 8, of previous column
current assets Profit before tax 6 = 1-2-3-4-5 -6.8 4
Cash 3 0.2 4.9 Closing balance, Cash flow statement
Tax 7 = 60% of 6 0 2.4 Tax rate 60%
Other current assets 20 30 Add (subtract) to last year, values given
Profit after tax 8 = 6-7 -6.8 1.6 Profit before tax - tax
miscellaneous expenditure and losses
preliminary and preoperative expenses 2 2 2 Add (subtract) to last year, values given
profit and loss account balance 0 6.8 0 Add (subtract) Profit after tax
Total 25 67 82.1
Topics
1. Outlays (spending) and Financing (raising financial resources)
2. Projected Revenue and Costs
3. Projected Profit and Loss Project
Management
4. Projected Cash Flow
5. Projected Balance Sheet
6. NPV concept
7. Using NPV of projected cash flows for project selection
L E C T U R E - 5 , 2 0 A U G U S T 2 0 1 6 S AT U R D AY, 4 - 6 P M
20Aug 2016 Saturday. 4-6 pm MBA ZG523 PJM LECTURE-5 BITS-PILANI 3
Project cost =
Land, Site Development, Buildings, Civil works +
Plant and Machinery +
Licensing/Know-how, Engineering, Consulting and legal charges +
Pre-operative expenses +
Margin Money for working capital (25% of one month worth of raw
materials, wages, and electricity, etc + WIP)
Financial Analysis
Chapter 6: Estimates and Projections
Continued from last Lecture..
20Aug 2016 Saturday. 4-6 pm MBA ZG523 PJM LECTURE-5 BITS-PILANI 4 20Aug 2016 Saturday. 4-6 pm MBA ZG523 PJM LECTURE-5 BITS-PILANI 2
Projected Revenue Working capital=
Year 1 2 3 4 5 N Capital required to run the operations. Incurred every
month
Sales (Units) q1 q2 q3 q4 q5 qN
Raw material +
Price (Rs/unit) p1 p2 p3 p4 p5 pN Wages and salaries +
Revenue (Rs) R1 R2 R3 R4 R5 RN Utilities +
Repair and Maintenance +
Revenue = Sales * Price Sales expenses +
WIP +
Finished goods inventory +
Taxes
Revenues to be computed for sales of all products and services.
Estimation of operation costs Means of Finance =

Cost of production = Share capital- (by promoters & investors) +
Materials + Long term loans- (by banks) +
Labour & Wages + Deferred payment for land, machinery, supplies (by suppliers) +
Utilities: Power, water + Incentives from government (by government)
Services- security, housekeeping, landscaping +
Sales costs- advertising + promotion Project Cost = Means of Finance
Overheads- Taxes, rent, insurance, Repair & Maintenance
Projected Revenue & Costs,
and Projected profit and loss Download Excel Worksheet
Projected Revenue and Costs (per year) PJM Project Cash Flows and Balance Sheet
Sales 30 60 =revenue*price
Cost of Goods Sold 30 40 =RM+Labour+utilities+Mkt costs+
Interest 4.8 6.4 Given: based on loans taken
Depreciation 2 2.8 Given: depreciation of assets
Projected profit and loss (per year)

Sales 1 30 60 from above
Cost of Goods Sold 2 30 40 from above
Interest 3 4.8 6.4 from above
Depreciation 4 2 2.8 from above
Losses absorbed 5 0 6.8 from row 8, of previous column
Profit before tax 6 = 1-2-3-4-5 -6.8 4
Tax 7 = 60% of 6 0 2.4 Tax rate 60%
Profit after tax 8 = 6-7 -6.8 1.6 Profit before tax - tax
Projected cash flow Outlays and Financing

Projected Cash Flow Year-0 Year-1 Year-2
Sources of Funds Outlays (per year) For-
Share issue 10 15 Given Preliminary and pre-operative expenses 2 Project Implementation agency
Profit Before tax and Interest added back -2 17.2 PBT + Interest + losses absorbed
Depreciation provision 2 2.8 Given
Fixed assets 20 20 10 Land, Building, Machinery
Increase in secured medium and long-term borrowings 15 15 7.5 Given Current assets 20 10 RM + WIP +FG inventory +Cash
Increase in bank borrowing for working capital 12 6 Given
Total 25 42 33.5 Total of above rows Financing (per year) From-
Share Capital 10 15 Promoters & Investors
Disposition of funds Term Loan 15 15 7.5 Banks
Capital expenditure for the project 20 20 10 Given
Short term bank borrowing 12 6 Banks
Increase in current assets 20 10 Given
Preliminary and operative expenses 2 0 0 Given
Taxes 0 0 2.4 From Profit and Loss, row 7 All values are given.
Total 22 44.8 28.8 Total of above rows
Opening balance of cash 0 3 0.2 Closing cash of previous year
Total Projected cash flow Total
Net surplus/deficit 3 -2.8 4.7 Disposition of funds
closing balance of cash in hand and at bank 3 0.2 4.9 Opening cash + Net surplus/deficit
Financial criteria Projected Balance Sheet
Payback period Year-0 Year-1 Year-2
Projected Balance Sheet
Net present value (NPV) Liabilities
Share capital 10 25 25 Add (subtract) to last year, values given
Internal rate of return (IRR) reserves and surplus 0 0 1.6 Add (subtract) Profit after tax
secured loan 0 0 0 Add (subtract) to last yaer, values given
Benefit Cost Ratio (BCR) term loan 15 30 37.5 Add (subtract) to last year, values given
short term bank borrowing 12 18 Add (subtract) to last year, values given
Total 25 67 82.1
Assets
fixed assets 20 38 45.2 FA added - depreciation
current assets
Cash 3 0.2 4.9 Closing balance, Cash flow statement
Other current assets 20 30 Add (subtract) to last year, values given
miscellaneous expenditure and losses
preliminary and preoperative expenses 2 2 2 Add (subtract) to last year, values given
profit and loss account balance 0 6.8 0 Add (subtract) Profit after tax
Total 25 67 82.1
Cash flows
Cash inflows
1 3 5 7 9 year Financial Criteria

Cash outflow(s)
Download Excel worksheet Example- Payback period
PJM NPV IRR Payaback Period Year- 1 2 3 4 5 6 7 8 9
Cash flow (Rs Cr) -20 5 5 15 20 20 20 25 30
Payback period is 3+ years, (Rs 20 cr is recovered as 5, 5, 15)
Payback period
Time to recover investments.
Easy to understand and quick to compute.
Time Value of Ignores cash flows after the payback period.

Focuses on recovery not profitability.
Normally underestimates profitability of the project.
Money Promotor does not want to take high risks.

Do not take a project if payback period is more than X (say 5) years.

Chapter 7: Time Value of Money
Present Value Future value
Present value (PV) of the cash received (FV) after t years if discount rate is r, Future value of Rs 100 after 't' years, interest rate 10% pa
800
700
PV = FV(t)/(1+r) t
600
500
Present value of cash received C1, C2, C3, C4 after the end of the year 1, 2, 3, 4,
Rs
400
PV of C1= C1/(1+r)1 300
PV of C2= C2/(1+r)2 200
PV of C3= C3/(1+r)3 100
PV of C4= C4/(1+r)4 0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
Present value Future Value of Rs 100

Present value is Rs 100 of payments made after 't' years, discount After Year 1 2 3 4 5 6 7 8 9
rate 10% pa
Interest rate (0%) 100 100 100 100 100 100 100 100 100
800
700
Interest rate (10%) 100 110 121 133.1 146.4 161.1 177.2 194.9 214.4
600 Interest rate (18%) 100 118 139.2 164.3 193.9 228.8 270.0 318.5 375.9
500
FV (t) = PV * (1+ r/100)t

Rs
400
300
PV - Principal or Initial investment in at the beginning of year 1 (Rs)
200
r- Interest rate, Rs/100 Rs per year
100
t- period, years
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FV(t)- Future value at the end of year (t), Rs
Year
NPV Net Present Value (NPV)
Project is profitable if NPV > 0 Cash inflows
Considers all cash flows.

Considers time value of money: cash today is more valuable than that 0 1 3 5 7 9 year
given tomorrow
Output in Rupees Cash outflow(s)
Needs estimation of discount rate, r
NPV- Sum of PVs of all cash flows.

NPV = PV(0) + PV(1) + PV(2) + PV(3) .. + PV(9)
NPV = -Co/(1+r)0 + C1/(1+r)1 + C2(1+r)2 ..+ C9/(1+r)9
Internal Rate of Return (IRR) NPV in Excel, Excel Function

Cash inflow Year- 0 1 2 3 4 5 6 7 8
Net CashFlow -20 5 5 15 20 20 20 25 30
Present value, discount rate 10% -20 4.5 4.1 11.3 13.7 12.4 11.3 12.8 14.0
Net present value (sum of values
in above rows) 64.1
1 3 5 7 9 year
Cash outflow(s)
Excel formula
What is that r which makes NPV=0. This is no-profit no-loss rate.
=NPV(DiscountRate,Range)-CashFlowofYear0
0 = -Co/(1+r)0 + C1/(1+r)1 + C2(1+r)2 + .. + C8/(1+r)8
=NPV(0.10,5,5,15....30)-20 = 64.1
Discount rate, r, that satisfies the above equation is called IRR
Benefit Cost Ratio Internal Rate of Return (IRR)
Benefit Cost Ratio (BCR):
PV of Benefits/PV of Investment Project can be taken if IRR > cost of capital
If IIR is 14% and cost of capital is 12%, the project can be
Year- 0 1 2 3 4 5 6 7 8
Net Cash Flow -20 5 5 15 20 20 20 25 30
taken.
Present value, discount Considers all cash flows
rate 10% 4.5 4.1 11.3 13.7 12.4 11.3 12.8 14.0
Present value of Inflows 64.1 IRR may not be unique
Assumes constant rate of return throughout the project
BCR = 64.1/20= 3.21
life
Using Financial Criteria Example- IRR

Compute all End of Year--- 0 1 2 3 4 5 6 7 8
Payback period
Cash flow -20 5 5 15 20 20 20 25 30
NPV
(Rs Cr)
IRR
BCR IRR is 51.89%
Excel function:
Then decide
=IRR(Range,Guess). Put guess IRR as 0.15, 0.20, etc.
=IRR(-20,5,5,15.25,30,0.15)
=0.5189, 51.89%
The cost of capital
Chapter 10: The Cost of Capital
Determining r for NPV equation

r is cost of capital (not capital cost)
Project r should be Weighted Average Cost of Capital (WACC)

WACC is different from Capital cost, which is is cost of plant, machinery,
buildings and other fixed assets (say 500 crores)
Management Computing WACC

Project financed by
COURSE CODE: MBA ZG523 Equity by promoters: say, 25% of project cost by promoters, expecting 18% return
L E C T U R E - 6 , 2 7 A U G U S T 2 0 1 6 S AT U R D AY, 4 - 6 P M Loans from banks: say, 75% of project cost at interest rate 14%
FA C U LT Y: S A N D E E P K AYA S T H A , AT H Y D E R A B A D Weighted Average Cost of Capital (WACC)
WACC = % by promoters * expected return + % on loans * interest rate
WACC = 0.25*0.18+ 0.75*0.14 = 0.15 or 15%
Use r = WACC =15%

Future Value of Rs 100
After Year 1 2 3 4 5 6 7 8 9
Interest rate (0%)
Interest rate (10%)
100
100
100
110
100
121
100
133.1
100
146.4
100
161.1
100
177.2
100
194.9
100
214.4
Time Value of
Money
Interest rate (18%) 100 118 139.2 164.3 193.9 228.8 270.0 318.5 375.9
FV (t) = PV * (1+ r/100)t

PV - Principal or Initial investment in at the beginning of year 1 (Rs) TEXTBOOK # 2 : P ROJ EC TS BY P R A S ANNA C H A N D R A
r- Interest rate, Rs/100 Rs per year Chapter 7: Time Value of Money
t- period, years
FV(t)- Future value at the end of year (t), Rs
27Aug 2016 Saturday. 4-6 pm MBA ZG523 PJM LECTURE-6 BITS-PILANI 27Aug 2016 Saturday. 4-6 pm MBA ZG523 PJM LECTURE-6 BITS-PILANI
Present Value Future value

Present value (PV) of the cash received (FV) after t years if discount rate is r, Future value of Rs 100 after 't' years, interest rate 10% pa
800
700
PV = FV(t)/(1+r) t
600
500
Present value of cash received C1, C2, C3, C4 after the end of the year 1, 2, 3, 4,
Rs
400
PV of C1= C1/(1+r)1 300
PV of C2= C2/(1+r)2 200
PV of C3= C3/(1+r)3 100
PV of C4= C4/(1+r)4 0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
NPV in Excel, Excel Function Present value
Year- 0 1 2 3 4 5 6 7 8
Net CashFlow -20 5 5 15 20 20 20 25 30 Present value is Rs 100 of payments made after 't' years, discount
rate 10% pa
Present value, discount rate 10% -20 4.5 4.1 11.3 13.7 12.4 11.3 12.8 14.0
800
Net present value (sum of values
in above rows) 64.1 700
600
500
Rs
400
Excel formula
300
=NPV(DiscountRate,Range)-CashFlowofYear0 200
100
=NPV(0.10,5,5,15....30)-20 = 64.1
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
Download Excel file fro Taxila Net Present Value (NPV)

PJM NPV IRR Payback ExcelFile-2 Cash inflows
For 0 1 3 5 7 9 year
NPV and IRR examples

Cash outflow(s)
Solution of Example2 is in sheet1
NPV- Sum of PVs of all cash flows.

NPV = PV(0) + PV(1) + PV(2) + PV(3) .. + PV(9)
NPV = -Co/(1+r)0 + C1/(1+r)1 + C2(1+r)2 ..+ C9/(1+r)9
Internal Rate of Return (IRR) NPV
Project is profitable if NPV > 0
Project can be taken if IRR > cost of capital
If IIR is 14% and cost of capital is 12%, the project can be Considers all cash flows.
taken.
Considers time value of money: cash today is more valuable than that
Considers all cash flows given tomorrow
IRR may not be unique Output in Rupees
Assumes constant rate of return throughout the project Needs estimation of discount rate, r
life.
Output is in %.
Example- IRR Internal Rate of Return (IRR)

End of Year--- 0 1 2 3 4 5 6 7 8 Cash inflow
Cash flow -20 5 5 15 20 20 20 25 30

(Rs Cr)
IRR is 51.89% 1 3 5 7 9 year
Cash outflow(s)
Excel function:
What is that r which makes NPV=0. This is no-profit no-loss rate.
=IRR(Range,Guess). Put guess IRR as 0.15, 0.20, etc.
0 = -Co/(1+r)0 + C1/(1+r)1 + C2(1+r)2 + .. + C8/(1+r)8
=IRR(-20,5,5,15.25,30,0.15)
=0.5189, 51.89% Discount rate, r, that satisfies the above equation is called IRR
Benefit Cost Ratio
Benefit Cost Ratio (BCR):
PV of Benefits/PV of Investment
Year- 0 1 2 3 4 5 6 7 8
The cost of capital Net Cash Flow

Present value, discount
rate 10%
-20 5
4.5
5
4.1
15 20 20 20
11.3 13.7 12.4 11.3 12.8 14.0

25 30
Present value of Inflows 64.1

Chapter 10: The Cost of Capital BCR = 64.1/20= 3.21
Determining r for NPV equation Using Financial Criteria

r is cost of capital (not capital cost) Compute all
Payback period
r should be Weighted Average Cost of Capital (WACC)
NPV
WACC is different from Capital cost, which is cost of plant, machinery,
buildings and other fixed assets (say Rs 500 crores) IRR
BCR
Computing WACC
Project financed by
Equity by promoters: say, 25% of project cost by promoters, expecting 18% return
Then decide
Loans from banks: say, 75% of project cost at interest rate 14%
Weighted Average Cost of Capital (WACC)
WACC = 0.25*0.18+ 0.75*0.14 = 0.15 or 15%
Use r = WACC =15%
Determining r for NPV equation
r is cost of capital (not capital cost)
r should be Weighted Average Cost of Capital (WACC)
WACC is different from Capital cost, which is cost of plant, machinery,
buildings and other fixed assets (say Rs 500 crores)
Project
Computing WACC
Project financed by
Management
Equity by promoters: say, 25% of project cost by promoters, expecting 18% return COURSE CODE: MBA ZG523
Loans from banks: say, 75% of project cost at interest rate 14% L E C T U R E - 7 , 3 S E P T E M B E R 2 0 1 6 S AT U R D AY, 4 - 6 P M
Weighted Average Cost of Capital (WACC) FA C U LT Y: S A N D E E P K AYA S T H A , AT H Y D E R A B A D
WACC = 0.25*0.18+ 0.75*0.14 = 0.15 or 15%
Use r = WACC =15%
Organisation
Structure and
Culture The cost of capital
TEXTBOOK # 1 : TEXTBOOK # 2 : P ROJ EC TS BY P R A S ANNA C H A N D R A
Chapter 3 Chapter 10: The Cost of Capital
Organization Chart- Example What Is Organizing?
Information Services Group
Organizing
Knowledge Architecture Manager
Arranging the activities
Knowledge Architecture Lead Search/Systems Lead Design Lead of the enterprise in such
a way that they
Customer Liaison Developer Assistant Designer systematically
Developer contribute to the
Cataloger
Systems Admin
enterprises goals.
Cataloger
Taxonomy Designer
37 5
Hierarchical team organization

Depicting the Organization
Organization Chart
A chart that shows the structure
of the organization including the
title of each managers position
and, by means of connecting
lines, who is accountable to whom
Large projects often distinguish levels of management: and who has authority for each
Leaf nodes is where most development gets done; rest of tree is management area.
Different levels do different kinds of worka good engineer or programmer may not be a
good manager
Status and rewards depend on your level in the organization
Works well when projects have high degree of certainty, stability and repetition
8
36
Structure Variables Organization Design and Structure
Principles Departmentalization Organization design
Chain of command Functional A process in which managers develop or change their organizations
Span of control Divisional structure
Authority Product
Work specialization
Customer
Power A component of organization structure that involves having each discrete
Geographic
Responsibility step of a job done by a different individual rather than having one individual
Process
do the whole job
311 39
Organizational Structure: Control

Economies of Work Specialization
Chain of command
The management principle that no person should report to more than one boss
Span of control
The number of subordinates a manager can direct efficiently and effectively
Authority
The rights inherent in a managerial position to give orders and expect them to be
obeyed
Responsibility
An obligation to perform assigned activities
Power
An individuals capacity to influence decisions
312 310
Spans of Control in Country- Chain of Command
Based Organization
315 313
PROJECT MANAGEMENT Tall And Flat Organizations, And

STRUCTURES The Span Of Control
1. Functional organization Span of Control
The number of subordinates reporting directly to a supervisor.
2. Projectized organization (Dedicated Teams) Wide spans: larger number of direct reports.
Narrow spans: fewer number of direct reports.
3. Matrix organization Tall vs. Flat Organizations
Tall organizations: more management layers and more hierarchical controls.
Flat organizations: fewer management layer and decision making closer to the
customer.
1 March, Tuesday. 5-7 pm BITS-PILANI 16 314

PROJECTIZED ORGANIZATIONAL
STRUCTURE FUNCTIONAL ORGANIZATIONS
1 March, Tuesday. 5-7 pm BITS-PILANI 19 1 March, Tuesday. 5-7 pm BITS-PILANI 17
MATRIX ORGANIZATION STRUCTURE DEDICATED PROJECT TEAM

PROJECT MANAGER AND FUNCTIONAL
MANAGER RESPONSIBILITIES IN A MATRIX
DIFFERENT MATRIX FORMS STRUCTURE
Weak Form Project Manager Functional Manager
The authority of the functional manager predominates and the
project manager has indirect authority. What has to be done? How will it be done?
Balanced Form How much money is available How will the project involvement
The project manager sets the overall plan and the functional to do the task? impact normal functional activities?
manager determines how work to be done.
How well has the total project How well has the functional
Strong Form been done? input been integrated?
The project manager has broader control and functional
departments act as subcontractors to the project.
PROJECT ORGANIZATION:
MATRIX FORM
ADVANTAGES DISADVANTAGES
Project Efficient
Strong Project Focus
Easier Post-Project Transition
Dysfunctional Conflict
Infighting
Stressful
Management Flexible Slow
L E C T U R E - 8 , 1 0 S E P T E M B E R 2 0 1 6 S AT U R D AY, 4 - 6 P M
1 March, Tuesday. 5-7 pm BITS-PILANI 22

Organizational Structure: Control
Chain of command
Organisation
Structure and
The management principle that no person should report to more than one boss
Span of control
The number of subordinates a manager can direct efficiently and effectively
Authority
The rights inherent in a managerial position to give orders and expect them to be
obeyed
Culture
Responsibility TEXTBOOK # 1 :
An obligation to perform assigned activities Chapter 3
Power Continued.
An individuals capacity to influence decisions
10Sep2016 Saturday. 4-6 pm MBA ZG523 PJM LECTURE-8 BITS-PILANI 10Sep2016 Saturday. 4-6 pm MBA ZG523 PJM LECTURE-8 BITS-PILANI
PROJECT MANAGEMENT
STRUCTURES Organisation structure
1. Functional organization
2. Projectized organization (Dedicated Teams)
3. Matrix organization
MATRIX ORGANIZATION STRUCTURE FUNCTIONAL ORGANIZATIONS
DIFFERENT MATRIX FORMS DEDICATED PROJECT TEAM

Weak Form
The authority of the functional manager predominates and the
project manager has indirect authority.
Balanced Form
The project manager sets the overall plan and the functional
manager determines how work to be done.
Strong Form
The project manager has broader control and functional
departments act as subcontractors to the project.
WHAT IS THE RIGHT PROJECT
ORGANIZATIONAL CULTURE MANAGEMENT STRUCTURE?
Organizational Culture- Organization (Form) Considerations
How important is the project to the firms success?
A system of shared norms, beliefs, values, and
assumptions which bind people together, thereby What percentage of core work involves projects?
creating shared meanings. What level of resources (human and physical) are available?
Helps legitimize the management system of the organization.
Clarifies and reinforces standards of behavior.
CULTURAL DIMENSIONS OF AN
ORGANIZATION SUPPORTIVE OF PROJECT WHAT IS THE RIGHT PROJECT
MANAGEMENT MANAGEMENT STRUCTURE? (CONTD)
Project Considerations
Size of project
Strategic importance
Novelty and need for innovation
Need for integration (number of departments involved)
Environmental complexity (number of external interfaces)
Budget and time constraints
Stability of resource requirements
IMPLICATIONS OF ORGANIZATIONAL
WHERE WE ARE NOW CULTURE FOR ORGANIZING PROJECTS
Challenges for Project Managers in Navigating
Organizational Cultures
Interacting with the culture and subcultures of the parent
organization
Interacting with the projects clients or customer organizations
Interacting with other organizations connected to the project
DEFINING THE PROJECT

Step 1: Defining the Project Scope
Step 2:
Step 3:
Establishing Project Priorities
Creating the Work Breakdown Structure (WBS) Defining the
Project
Step 4: Integrating the WBS with the Organization
Step 5: Coding the WBS for the Information System
TEXTBOOK # 1 :
Chapter 4
PROJECT SCOPE STEP 1: DEFINING THE PROJECT
TERMS AND DEFINITIONS SCOPE
Scope Statements Project Scope
Also called statements of work (SOW) A definition of the end result or mission of the projecta product or service
for the client/customerin specific, tangible, and measurable terms.
Project Charter
Can contain an expanded version of scope statement Purpose of the Scope Statement
A document authorizing the project manager to initiate and lead the project. To clearly define the deliverable(s) for the end user.
Scope Creep To focus the project on successful completion of its goals.

The tendency for the project scope to expand over time due to changing To be used by the project owner and participants
requirements, specifications, and priorities. as a planning tool and for measuring project success.
STEP 2: ESTABLISHING PROJECT

PRIORITIES PROJECT SCOPE CHECKLIST
Causes of Project Trade-offs 1. Project objective
Shifts in the relative importance of criterions related
to cost, time, and performance parameters 2. Deliverables
BudgetCost 3. Milestones
ScheduleTime
PerformanceScope 4. Technical requirements
Managing the Priorities of Project Trade-offs 5. Limits and exclusions
Constrain: a parameter is a fixed requirement.
6. Reviews with customer
Enhance: optimizing a criterion over others.
Accept: reducing (or not meeting) a criterion requirement.
STEP 3: CREATING THE WORK
BREAKDOWN STRUCTURE PROJECT MANAGEMENT TRADE-OFFS
Work Breakdown Structure (WBS)
An hierarchical outline (map) that identifies the products and work elements
involved in a project.
Defines the relationship of the final deliverable (the project) to it sub-
deliverables, and in turn, their relationships to work packages.
Best suited for design and build projects that have tangible outcomes rather
than process-oriented projects.
FIGURE 4.1
WBS for a building a house PROJECT PRIORITY MATRIX
FIGURE 4.2
Defining the Hierarchical
Breakdown of the
WBS
Project * This breakdown groups work

packages by type of work within a
deliverable and allows assignment
of responsibility to an organizational
TEXTBOOK # 1 : unit. This extra step facilitates a
system for monitoring project
Chapter 4 progress.
DEFINING THE PROJECT

Step 1: Defining the Project Scope
Step 2:
Step 3:
Establishing Project Priorities
Creating the Work Breakdown Structure (WBS) Project
Management
Step 4: Integrating the WBS with the Organization
Step 5: Coding the WBS for the Information System
L E C T U R E - 9 , 1 1 S E P T E M B E R 2 0 1 6 S U N D AY, 4 - 6 P M
10Sep2016 Saturday. 4-6 pm MBA ZG523 PJM LECTURE-8 BITS-PILANI

STEP 3: CREATING THE WORK
BREAKDOWN STRUCTURE PROJECT SCOPE CHECKLIST
Work Breakdown Structure (WBS) 1. Project objective
An hierarchical outline (map) that identifies the products and work elements 2. Deliverables
involved in a project.
3. Milestones
Defines the relationship of the final deliverable (the project) to it sub-
deliverables, and in turn, their relationships to work packages. 4. Technical requirements
Best suited for design and build projects that have tangible outcomes rather 5. Limits and exclusions
than process-oriented projects.
6. Reviews with customer
WBS for a building a house PROJECT PRIORITY MATRIX
FIGURE 4.2
WBS- another example
Hierarchical
Breakdown of the
WBS
* This breakdown groups work

packages by type of work within a
deliverable and allows assignment
of responsibility to an organizational
unit. This extra step facilitates a
system for monitoring project
progress.
WORK BREAKDOWN STRUCTURE

WORK PACKAGES
A work package is the lowest level of the WBS.
It is output-oriented in that it:
1. Defines work (what).
2. Identifies time to complete a work package (how long).
3. Identifies a time-phased budget to complete a work package (cost).
4. Identifies resources needed to complete a work package (how
much).
5. Identifies a person responsible for units of work (who).
6. Identifies monitoring points (milestones) for measuring success.
FIGURE 4.4
Integration of
WBS and OBS
HOW WBS HELPS
THE PROJECT MANAGER
WBS
Facilitates evaluation of cost, time, and technical performance of the
organization on a project.
Provides management with information appropriate to each organizational
level.
Helps in the development of the organization breakdown structure (OBS).
which assigns project responsibilities to organizational units and individuals
Helps manage plan, schedule, and budget.
Defines communication channels and assists in coordinating the various
project elements.
FIGURE 4.5
STEP 4: INTEGRATING THE WBS

Integration of WBS and OBS WITH THE ORGANIZATION
Organizational Breakdown Structure (OBS)
Depicts how the firm is organized to discharge its work responsibility
for a project.
Provides a framework to summarize

organization work unit performance.
Identifies organization units responsible
for work packages.
Ties organizational units to cost control
accounts.
STEP 5: CODING THE WBS FOR Direct labor budget sorted by
THE INFORMATION SYSTEM WBS
WBS Coding System
Defines:
Levels and elements of the WBS
Organization elements
Work packages
Budget and cost information
Allows reports to be consolidated at any level in
the organization structure
Coding
the WBS
Direct labor budget sorted by
OBS
EXHIBIT 4.5
MBA ZG523 PJM LECTURE-8 BITS-PILANI
Direct Labor Budget Rollup Work Package Estimates
Process Breakdown Structure Project Roll-up

Process-Oriented Projects Cost Account
Are driven by performance requirements in which the final outcome
is the product of a series of steps of phases in which one phase The intersection of the WBS and the OBS that is a
affects the next phase. budgetary control point for work packages.
Process Breakdown Structure (PBS) Used to provide a roll-up (summation) of costs incurred
Defines deliverables as outputs required to move to the next phase . over time by a work package across organization units
Checklists for managing PBS: and levels, and by deliverables.
Deliverables needed to exit one phase and begin the next.
Quality checkpoints for complete and accurate deliverables.
Sign-offs by responsible stakeholders to monitor progress.
PBS for Software Project
RESPONSIBILITY MATRICES Development
Responsibility Matrix (RM)
Also called a linear responsibility chart.
Summarizes the tasks to be accomplished and who is
responsible for what on the project.
Lists project activities and participants.
Clarifies critical interfaces between units and individuals that need
coordination.
Provide an means for all participants to view their responsibilities and
agree on their assignments.
Clarifies the extent or type of authority that can be exercised by each
participant.
RESPONSIBILITY MATRIX FOR A MARKET PBS FOR SOFTWARE DEVELOPMENT

RESEARCH PROJECT PROJECT
FIGURE 4.7
STAKEHOLDER RESPONSIBILITY MATRIX FOR
COMMUNICATIONS THE CONVEYOR BELT PROJECT
PROJECT COMMUNICATION
INFORMATION NEEDS PLAN
Project status reports What information needs to be collected and when?
Deliverable issues Who will receive the information?
Changes in scope What methods will be used to gather and store information?
Team status meetings What are the limits, if any, on who has access to certain kinds of
information?
Gating decisions
When will the information be communicated?
Accepted request changes
How will it be communicated?
Action items
Milestone reports
DEVELOPING A COMMUNICATION PLAN
Mid Term Examination syllabus is 1. Stakeholder analysis
up to Defining the Project. 2. Information needs
3. Sources of information
That is, Chapters, Lectures and 4.

5.
Dissemination modes
Responsibility and timing
Slides covered till now.
11Sep, Sun 4-6 pm BITS-PILANI 34 10Sep2016 Saturday. 4-6 pm MBA ZG523 PJM LECTURE-8 BITS-PILANI
SHALE OIL RESEARCH PROJECT

COMMUNICATION PLAN
Project
Management
L E C T U R E - 1 0 , 1 7 S E P T E M B E R 2 0 1 6 S AT U R D AY, 4 - 6 P M

Example: Project- Cooking
Food-1
Activity
A. Cook Rice
Duration
10 min
A
Developing a
B. Cook Dal/Sambhar 30 min B
Project plan
CHAPTER-6: DEVELOPING A PROJECT
PLAN
CONTINUED
17 Sep, Saturday 4-6 pm BITS-PILANI 4 17 Sep, Saturday 4-6 pm BITS-PILANI 62

Food-2 Developing the Project Plan
Sequential-1 The Project Network
A flow chart that graphically depicts the sequence, interdependencies, and
Start A B Finish start and finish times of the project job plan
Project duration = 10+30 = 40 min CPM/PERT
Sequential-2
Start B A Finish
Project duration = 30+10 = 40 min
Start and Finish activities introduced with 0 durations. It makes the network easy to read and analyse.

Example-1: Project- Cooking Example: Project- Cooking
Food-5- activities in parallel Food-3- activities in sequence
Activity Duration Immediate Predecessor Activities
A. Cook Rice 10min - A. Cook Rice 10 min
B. Cook Dal/Sambhar 30 min - B. Cook Dal/Sambhar 30 min
Parallel A
A
A: 10
B
B
Start:0 Finish:0
B:30
Sequential-1 Sequential-2
Gantt Charts
Project duration = Max(10,30) = 30 min
Example: Project- Cooking Example: Project- Cooking

Food-6 Food-4- activities in sequence
Activities Activities
A. Cook Rice 10 min A. Cook Rice 10 min
B. Cook Dal/Sambhar 30 min B. Cook Dal/Sambhar 30 min
A
A A
B
B B
30
Gantt Chart Sequential-1 Sequential-2
Milestones
Constructing a Project
Developing the Project Plan Network
Activity: an element of the project that
CPM PERT A
Critical Path Method Program Evaluation and Review has preceding and succeeding activities
Technique requires time
Activity on Arrow (A-O-A)
Activity on Node (A-O-N) requires resources/cost
No uncertainty in activity B D
duration Uncertainty in activity duration
Project Network Inputs & outputs Constructing a Project

Network
Inputs Outputs Two Approaches
Activity-on-Arrow (AOA)
Activity-on-Node (AON)
Uses a node to depict an activity.
Uses an arrow to depict an activity. Well use this approach- used in most
software and is simpler
Milestones Well not use this approach
Activities
Schedule of activities, Gantt Charts
Sequential dependency
of activities Critical activities, Critical Path
Schedule of Resources
Activity duration
Budgeting & Cash Outflows
Activity resources and
costs Monitoring and Control

Determining shortest project duration- Determining shortest project duration-
when network is large when network is small
Steps Identify all paths from start to end
Forward Pass: Determine ES and EF for each activity.
Begin with from Start node
The longest path gives shortest duration to
complete the project.
Backward Pass: Determine LF and LS for each activity.
Begin with End node
A: 10
Find slack of activities: Slack = LS-ES (= LF-EF)
Start:0 Finish:0
The path(s) that has no slack activities is called Critical B:30

Path. This path is longest and gives shortest duration to
complete the project. Path-1: Start-A-Finish. Duration of path- 0 + 10 + 0 = 10 minutes
Path-2: Start-B-Finish. Duration of path- 0 + 30 + 0 = 30 minutes
Shortest duration to complete the project = 30 minutes, from longest path.

Food Cooking Food, Critical path
[0,10]
[0,0] [30,30]
A:10 A:10
[20,30]
Start:0 Finish:0 Start:0 Finish:0
[0,30]
B:30 [0,0] B:30 [30,30]
Critical path: Start-B-Finish [0,30]

Non-Critical path(s): Start-A-Finish
Critical activities: Start, B, Finish

Non-Critical activities: A
Minimum time to complete the project: 30 mts

Cooking Food, ES and EF and LS and
LF, Critical path Cooking Food, ES and EF
[0,10] [0,10]
[0,0] [30,30] [0,0] [30,30]

A:10 A:10
[20,30]
Start:0 Finish:0 Start:0 Finish:0
[0,30] [0,30]
[0,0] B:30 [30,30] B:30
Critical path: Start-B-Finish [0,30]

Non-Critical path(s): Start-A-Finish
Critical activities: Start, B, Finish

Non-Critical activities: A
Minimum time to complete the project: 30 mts
Cooking Food- ES and EF and

Critical Path LS and LF
Activities that have zero slack (LS=ES or EF=FL) are called critical activities.
Activities that have slack are called non-critical activities
[0,10]
The path whose all activities have zero slack is called critical path.
[0,0] [30,30]
A:10
Critical path is the longest path of the network [20,30]
Start:0 Finish:0
Critical path gives the minimum duration to complete the project [0,30]
Delay in the activities on the critical path delays the project [0,0] B:30 [30,30]
Delay in the non-critical activities do not delay the project if the delay is within
slack [0,30]
Non critical activities provide flexibility to the manager in resource scheduling for
reducing costs Slack = LS-ES
Critical activities are few, hence monitor and control them closely
17 Sep, Saturday 4-6 pm

621 BITS-PILANI 17 Sep, Saturday 4-6 pm BITS-PILANI 19
Activity-on-Node
Fundamentals (contd) Basic Rules
An activity cannot begin until all preceding connected
activities are complete.
Arrows indicate precedence and arrows can cross over each
other.
Looping of activities is not allowed.
Conditional statements are not allowed.
Use common start and stop nodes.
Activity-on-Node
Network Computation Process Fundamentals
Forward PassEarliest Times
How soon can the activity start? (early start, ES)
How soon can the activity finish? (early finish, EF)
How soon can the project finish? (expected time, ET)
Backward PassLatest Times
How late can the activity start? (late start, LS)
How late can the activity finish? (late finish, LF)
Which activities represent the critical path?
How long can activity be delayed? (slack or float, SL)
17 Sep, Saturday 4-6 pm BITS-PILANI 17 Sep, Saturday 4-6 pm BITS-PILANI 23

Activity Details- Precedence
Example: 2 Network diagram table, examples
D:7
A:4 H:5
Start: 0 C:8 Finish:0
E:9
B:3 G:2
F:12 I:6
628
Example: 3 Forward Pass Example: 1 Details of activities

[4,11]
[0.4] [21,26]
D:7
A:4 H:5
[4,12]
[0.0] [30.30]
Start: 0 C:8 [12.21]

[21,23] Finish:0
[0.3]
E:9
B:3 G:2 [24,30]
[12,24]
F:12 I:6
[ES,EF]: Early Start, Early Finish

Example: 4 Backward Pass
Example: 6: Exercise
Use the following table to draw Milestone and [4,11]
Gantt Chart for the project
[0.4] [21,26]
Activity Duration ES EF LS LF Slack Critical? D:7
Start 0 0 0 0 0 0 Y A:4 [15,22] H:5
[4,12]
A 4 0 4 0 4 0 Y [0.0] [30.30]
B 3 0 3 9 12 9 N [0,4] [25,30]
C 8 4 12 4 12 0 Y Start: 0 C:8 [12.21]

[21,23] Finish:0
D 7 4 11 15 22 11 N [0.3]
[4,12]
E 9 12 21 13 22 1 N [0.0] E:9
F 12 12 24 12 24 0 Y B:3 G:2 [24,30]
[30.30]
[12,24] [13.22]
G 2 21 23 22 24 1 N [22,24]
[9,12]
H 5 21 26 25 30 4 N F:12 I:6
I 6 24 30 24 30 0 Y
End 0 30 30 30 30 0 Y [12,24] [24.30]
[ES,EF]: Early Start, Early Finish

[LS,LF]: Late Start, Late Finish
Example: 5 Critical path

[4,11]
[0.4] [21,26]
D:7
A:4 [15,22] H:5
[4,12]
[0.0] [30.30]
[0,4] [25,30]
Start: 0 C:8 [12.21]
[21,23] Finish:0
[0.3]
Inputs and Outputs in a

[4,12]
[0.0] E:9
B:3 G:2 [24,30]
[30.30]
[12,24] [13.22]
Project Management Software

[22,24]
[9,12]
F:12 I:6
[12,24] [24.30]
EXAMPLE-AIR CONTROL PROJECT [ES,EF]: Early Start, Early Finish
Activity Duration ES EF LS LF Slack Critical?
Start 0 0 0 0 0 0 Y
[LS,LF]: Late Start, Late Finish A 4 0 4 0 4 0 Y
B 3 0 3 9 12 9 N
C 8 4 12 4 12 0 Y
D 7 4 11 15 22 11 N
Critical path: Start-A-C-F-I-Finish
Critical activities- Start, A, C, F, I, Finish
E 9 12 21 13 22 1 N
Non-critical activities- B, D, E, G,, H F 12 12 24 12 24 0 Y
Minimum time to complete the project- 30 weeks G 2 21 23 22 24 1 N
H 5 21 26 25 30 4 N
I 6 24 30 24 30 0 Y
17 Sep, Saturday 4-6 pm BITS-PILANI 633 17 Sep, Saturday 4-6 pm BITS-PILANI End 0 30 30 30 30 031 Y
Air Control ProjectNetwork Diagram
Textbook
Example- Koll
Business Centre
FIGURE 6.11
17 Sep, Saturday 4-6 pm BITS-PILANI 636 634

17 Sep, Saturday 4-6 pm BITS-PILANI
Air Control ProjectGantt Chart
Network Information
TABLE 6.1 FIGURE 6.12

Activity-on-Node Network
Network Information
TABLE 6.2
FIGURE 6.5
641
17 Sep, Saturday 4-6 pm BITS-PILANI 17 Sep, Saturday 4-6 pm BITS-PILANI
Koll Business CenterComplete Network

Forward Pass Computation
Add activity times along each path in the network (ES + Duration =
EF).
Carry the early finish (EF) to the next activity where it becomes its
early start (ES) unless
The next succeeding activity is a merge activity, in which case the
largest EF of all preceding activities is selected.
FIGURE 6.4

Activity-on-Node Network Backward Pass Activity-on-Node Network Forward Pass
FIGURE 6.7 FIGURE 6.6
645
17 Sep, Saturday 4-6 pm BITS-PILANI 643
Determining Free Slack (or

Float) Backward Pass Computation
Free Slack (or Float) Subtract activity times along each path in the network (LF - Duration =
Is how long an activity can exceed its early finish date without affecting LS).
early start dates of any successor(s).
Carry the late start (LS) to the next activity where it becomes its late
Allows flexibility in scheduling of scarce resources. finish (LF) unless
The next succeeding activity is a burst activity, in which case the
smallest LF of all preceding activities is selected.
646
Activity-on-Node Network with Slack
Example of Laddering Using Finish-to-Start Relationship
649
Use of Lags-1 Finish-to-Start Relationship Extended Network Techniques

Laddering
Activities are broken into segments so the following activity can begin sooner
FIGURE 6.14 and not delay the work.
Start-to-Start Relationship Lags
The minimum amount of time a dependent activity must be delayed to begin
or end.
Lags can be used to constrain finish-to-start, start-to-start, finish-to-finish, start-to-finish, or
combination relationships.
FIGURE 6.15
Use of Lags-3
Use of Lags-2
Finish-to-Finish Use of Lags to Reduce Detail
Relationship
FIGURE 6.18
Start-to-Finish
Relationship FIGURE 6.19
Combination
Relationship
FIGURE 6.20
FIGURE 6.16
653
Network Using Lags
New Product Development

Process
654
PERT AND PERT Project
Simulation Management
CHAPTER-7: APPENDIX-7.1
L E C T U R E - 1 1 , 1 O C T O B E R 2 0 1 6 S AT U R D AY, 4 - 6 P M
TEXTBOOK: LARSON, GRAY AND DESAI FA C U LT Y: S A N D E E P K AYA S T H A , AT H Y D E R A B A D
1 Oct, Saturday 4-6 pm BITS-PILANI 3

Food-1 For next class
Activity Duration
A. Cook Rice 10 min
A Download Microsoft Project 2016
B
60-day trial version software from
B. Cook Dal/Sambhar 30 min
Microsoft.com
1 Oct, Saturday 4-6 pm BITS-PILANI 4 1 Oct, Saturday 4-6 pm BITS-PILANI 2

PERTPROGRAM EVALUATION REVIEW TECHNIQUE
Food-2
Network technique assumes certainty of activity duration Sequential-1
Not suitable for
Start A B Finish
R&D projects
New kinds of projects
PERT accommodates activity duration uncertainty
Sequential-2
Start B A Finish
Start and Finish activities introduced with 0 durations. It makes the network easy to read and analyse.
Example-1: Project- Cooking

Activity Duration Food-5- activities in parallel
Three estimates are made for each activity: Activity Duration Immediate Predecessor
Optimistic duration
A. Cook Rice 10min -
Pessimistic duration B. Cook Dal/Sambhar 30 min -
Most likely duration
Parallel
A: 10
The duration used for an activity is a weighted average of Optimistic,
Pessimistic and Most Likely duration Start:0 Finish:0
The weighted average duration is used for critical path, critical activities.
The variance of project duration is the sum of variances of critical activities B:30
Project duration = Max(10,30) = 30 min

Activity and Project Frequency
Activity Time Calculations (contd) Distributions
The variability in the activity time estimates is approximated by the
following equations:
The standard deviation for the activity:
The standard deviation for the project:
Note the standard deviation of the activity is squared in this equation; this is also called
variance. This sum includes only activities on the critical path(s) or path being reviewed.
Activity Times and Variances Activity Time Calculations

The weighted average activity time is computed by the
A following formula:
B
C
D
E
F

Using Normal Distribution Table The Network
1. Compute the Z value
2. Get probability value corresponding to Z value from

Normal distribution table- see next slide
Z Values Project duration

What is the probability that the project is
completed in
Less than t days?
More than t days?
Between t2 and t1 days
Method-1
What is the probability of completing the project in less than 60 days if the mean duration
Use Normal distribution table
to complete the project is 64 days and variance is 36 days.
Method-2
Z = (60-64) / sqrt(36) = -0.67
Can also use Excel function, = Norm.s.dist()
Probability corresponding to -0.67 is 0.25 or 25%

Resources PERT Example
People
Materials Download Excel File- PJM
Equipment
Working Capital
PERT from Taxila.
Types of Project Constraints

Technical or Logic Constraints
Constraints related to the networked sequence in which project activities
Scheduling
must occur.
Physical Constraints
Activities that cannot occur in parallel or are affected by contractual or
Resources and
environmental conditions.
Resource Constraints
The absence, shortage, or unique interrelationship and interaction
Costs
characteristics of resources that require a particular sequencing of project
activities. CHAPTER-8

Resource Constrained-
Example Constraint Examples
Gantt chart of a project, for ES/Ef schedule
Week
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Workmen Critical?
A 2 Y
B 3 Y
C 4 Y
D 1 Y
E 4 N
F 6 N
G 3 N
H 3 N
Maximum number of workmen that will be available in a week- 10

Develop a schedule that does not require more than 10 workmen in any week.
Download Excel File- PJM Resource Leveling from Taxila

Scheduling
Resource Constrained Project
Project A project in which the level of resources available

cannot be exceeded.
Resources are fixed, time is flexible: inadequate resources will delay the
Management
project.
COURSE CODE: MBA ZG523 Time Constrained Project

L E C T U R E - 1 2 , 8 O C T O B E R 2 0 1 6 S AT U R D AY, 4 - 6 P M A project that must be completed by an imposed date.
FA C U LT Y: S A N D E E P K AYA S T H A , AT H Y D E R A B A D Time is fixed, resources are flexible: additional resources are required to
ensure project meets schedule.

Scheduling
Resource Constrained Project
Scheduling
A project in which the level of resources available
cannot be exceeded.
Resources are fixed, time is flexible: inadequate resources will delay the
Resources and
Costs
project.
Time Constrained Project

A project that must be completed by an imposed date.
Time is fixed, resources are flexible: additional resources are required to
CHAPTER-8
ensure project meets schedule.
Resource Constrained-
Example Resources
Gantt chart of a project, for ES/Ef schedule People
Week
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Workmen Critical? Materials
A 2 Y
B 3 Y
Equipment
C 4 Y
Working Capital
D 1 Y
E 4 N
F 6 N
G 3 N
H 3 N
Maximum number of workmen that will be available in a week- 10

Develop a schedule that does not require more than 10 workmen in any week.
Download Excel File- PJM Resource Leveling from Taxila

Resource requirement for Schedule-1: ES/EF
Resource requirement for Schedule-3. Activity F is started 1 week after ES/EF schedule. Week
Week Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 A 2 2 2 2 2
A 2 2 2 2 2 B 3 3 3 3
B 3 3 3 3 C 4 4 4
C 4 4 4 D 1 1
D 1 1 E 4 4 4
E 4 4 4 F 6 6
F 6 6 G 3
G 3 H 3 3 Total Average Variance Maximum
H 3 3 Total Average Variance Maximum Total 2 6 6 6 8 12 6 3 3 4 4 7 1 1 69 4.93 8.99 12
Total 2 2 6 6 6 9 9 6 6 4 4 4 4 1 69 4.93 5.76 9

12 Resource requirement for Schedule-1: ES/EF
12 Resource requirement for Schedule-3. Activity F is started 1 week after ES/EF schedule.
10
10
8
8
6
6
4
4
2
Resource requirement for Schedule-4. Activity H is started 1 week after ES/EF schedule.
Week
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Resource requirement for Schedule-2: LS/LF
A 2 2 2 2 2 Week
B 3 3 3 3 Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14
C 4 4 4 A 2 2 2 2 2
D 1 1 B 3 3 3 3
E 4 4 4 C 4 4 4
F 6 6 D 1 1
G 3 E 4 4 4
H 3 3 Total Average Variance Maximum F 6 6
Total 2 6 6 6 8 9 6 6 3 4 4 4 4 1 69 4.93 4.84 9 G 3
H 3 3 Total Average Variance Maximum
12 Total 2 2 6 6 6 3 3 6 12 10 4 4 4 1 69 4.93 9.46 12
10
12 Resource requirement for Schedule-2: LS/LF
8
10
6 8
4 6
2
4

Summary of Resource
Resource Allocation Methods requirement
Resource Demand Leveling Techniques for Time-Constrained
Projects
Projects that must be completed by an imposed date. Total Average Variance Maximum
Schedule-1 ES/EF 69 4.93 8.99 12

Advantages
Peak resource demands are reduced.
Schedule-2 LS/LF 69 4.93 9.46 12
Resources over the life of the project are reduced.
Schedule-3 69 4.93 5.76 9
Fluctuation in resource demand is minimized.
Schedule-4 69 4.93 4.84 9
Disadvantages
Loss of flexibility that occurs from reducing slack.
Increases in the criticality of all activities.
Resource Allocation Methods Resource Allocation Methods

Resource-Constrained Projects Time-Constrained Projects
Projects that involve resources that are limited in quantity or by their
availability. Require the use of leveling techniques that focus on balancing or
smoothing resource demands by using positive slack (delaying
Scheduling of activities requires the use of heuristics (rules-of-thumb) that noncritical activities) to manage resource utilization over the
focus on:
duration of the project.
1. Minimum slack
2. Smallest (least) duration Peak resource demands are reduced.
3. Lowest activity identification number Resources over the life of the project are reduced.
The parallel method is used to apply heuristics Fluctuation in resource demand is minimized.
An iterative process that starts at the first time period of the project and schedules
period-by-period any activities scheduled to start using the three priority rules.

Rationale for Reducing Project
Duration The Resource Problem
Customer requirements and contract commitments Resource-Constrained Scheduling
Time-to-market pressures Resource leveling (or smoothing) involves attempting to
even out demands on resources by using slack (delaying
Incentive contracts (bonuses for early completion) noncritical activities) to manage resource utilization.
Unforeseen delays
Overhead and goodwill costs
Pressure to move resources to other projects
Accelerating Project Completion-

Options
1. Scheduling Overtime
2. Adding Resources
3. Outsourcing Project Work
Reducing Project
4. Reducing Project Scope
5. Compromise Quality Duration
CHAPTER-9

Reducing Project Duration to
Reduce Project Cost Project Costs- Indirect & Direct
Project Indirect Costs
Identifying direct costs to reduce project time Costs that cannot be associated with any particular work package or project
activity.
Supervision, administration, consultants, and interest
Gather information about direct and indirect costs Costs that vary (increase) with time.
of specific project durations. Reducing project time directly reduces indirect costs.
Direct Costs
Search critical activities for lowest direct-cost Normal costs that can be assigned directly to a specific work package or
activities to shorten project duration. project activity.
Labor, materials, equipment, and subcontractors
Compute total costs for specific durations and Crashing activities increases direct costs.
compare to benefits of reducing project time. Reducing activity time increases direct costs
Constructing a Project Cost

Duration Graph Project CostDuration Graph
Determining Activities to Shorten
Shorten the activities with the smallest increase in cost per unit of
time.
Assumptions:
The cost relationship is linear.
Normal time assumes low-cost, efficient methods to complete the
activity.
Crash time represents a limitthe greatest time reduction possible
under realistic conditions.
Slope represents a constant cost per unit of time.
All accelerations must occur within the normal and crash times.

CostDuration
Trade-off Example Normal and crash costs
Indirect cost $400 for 25 days of project duration. Per day indirect cost $ 50.
Reducing project duration from 25

The project (costs as in the previous slide) days to ??? that minimises total cost

CostDuration Trade-off CostDuration Trade-off
Example (contd) Example (contd)
Choose activity A for crashing

because it has least slope
among the activities on critical
path
Choose activity D for crashing

because it has least slope
Crashing F since its slope is least among
critical activities. Crashing of F makes all 3 among the activities on critical
paths critical. path
CostDuration Trade-off CostDuration Trade-off

Example (contd) Example (contd)
To reduce project duration by 1 period, activities from Now there are 2 critical paths,
each critical path to be reduced by 1 period. Here by
activities C, D and E. both C and are critical.

Summary Costs by Duration
Project
Management
L E C T U R E - 1 3 , 9 O C T O B E R 2 0 1 6 S U N D AY, 4 - 6 P M
Progress and Project CostDuration Graph

Performance
Measurement and
Evaluation
CHAPTER 13
9 Oct, Sunday 4-6 pm BITS-PILANI 2 8 Oct, Saturday 4-6 pm BITS-PILANI 31

Project Monitoring System for Planned Schedule
Month
Control Activity
A
1 2 3 4 5 6 7 8 9 10
Information System Structure B
Current status of project (schedule and cost) C
Remaining cost to compete project

D
Date that project will be complete
E
F
Potential problems to be addressed now
Out-of-control activities requiring intervention G
Cost and/or schedule overruns and the reasons for them

Today
Forecast of overruns at time of project completion Planned Schedule
9 Oct, Sunday 4-6 pm BITS-PILANI 5 9 Oct, Sunday 4-6 pm BITS-PILANI 3
Planned and Actual Schedule and Costs at the end of Month-5

Month Cost
Activity 1 2 3 4 5 6 7 8 9 10 Planned till Month-10 Actual till Month-5
Project Control Process A

10
15
10
B
25
Control 30
C
The process of comparing actual performance against 10% work remaining 20
30
plan to identify deviations, evaluate courses of action, D
40% work remaining 10
and take appropriate corrective action. E
15
10
Project Control Steps F

10
1. Setting a baseline plan. G

20
2. Measuring actual progress and performance.

Today Planned
3. Comparing plan against actual. Completed
4. Taking actions To be completed
From Excel file- PPME: Download from Taxila

Project Schedule Control Chart Monitoring Time Performance
Tools used to catch negative variances from plan and
communicate project schedule status:
Tracking and baseline Gantt charts
Show expected, actual, and trend data for event duration performance.
Control charts
Plot the difference in scheduled time on the critical path with the actual
point on the critical path.
Baseline and Tracking Gantt

Charts
Earned Value
Cost/Schedule
System

Glossary of Terms Glossary of Terms
ETC (Estimate to Complete) EV (Earned Value)
Estimate to complete. The percent complete times its original budget. The percent of the
original budget that has been earned by actual work completed. The
VAC older acronym for this value was BCWPbudgeted cost of the work
performed.
Cost variance at completion (BAC-EACe), where EACe is derived by
estimators in the field. PV (Planned Value)
Or, alternatively, cost variance at completion (BAC-EACf), where EACf The time-phased baseline of the value of the work scheduled. An
is derived from a formula using actual and earned value costs. approved cost estimate of the resources scheduled in a time-phased
cumulative baseline (older acronym BCWSbudgeted cost of the
VAC indicates expected actual over-or underrun cost at completion. work scheduled).
AC (Actual Cost)
The actual cost of the work completed. The sum of the costs incurred
in accomplishing work. (ACWPactual cost of the work performed).
Development of Project
Baselines Glossary of Terms
Purposes of a Baseline (PV) CV (Cost Variance)
An anchor point for measuring performance Difference between the earned value and the actual costs for the
A planned cost and expected schedule against which actual cost and schedule are measured. work completed to date where CV=EV-AC.
A basis for cash flows and awarding progress payments.
A summation of time-phased budgets (cost accounts as summed work packages) along a project
timeline.
SV (Schedule Variance)
Difference between the earned value and the baseline line to date
What Costs Are Included in Baselines? where SV=EV-PV.
Labor
Equipment BAC (Budgeted at Completion)
Materials Total budgeted cost of the baseline.
Project direct overhead costs (DOC)
EAC (Estimated Cost at Completion)
Costs to-date plus revised estimated costs for the work remaining.

Development of Project
Methods of Variance Analysis Baselines (contd)
Cost Variance (CV) Rules for Placing Costs in Baselines
Indicates if the work accomplished using labor and Costs are placed exactly as they are expected to be
materials costs more or less than was planned at any earned in order to track them to their point of origin.
point in the project. Percent Complete Rule
Costs are periodically assigned to a baseline as units of work are
Schedule Variance (SV) completed over the duration of a work package.
Presents an overall assessment in dollar terms of the
progress of all work packages in the project scheduled to
date.
Cost/Schedule Graph Methods of Variance Analysis

Comparing Earned Value
With the expected schedule value.
With the actual costs.
Assessing Status of a Project

Required data elements
Data Budgeted cost of the work scheduled (PV)
Budgeted cost of the work completed (EV)
Actual cost of the work completed (AC)
Calculate schedule and cost variances
A positive variance indicates a desirable condition, while a negative variance
suggests problems or changes that have taken place.

Indexes to Monitor Progress Earned Value
Performance Indexes
Cost Performance Index (CPI)
Measures the cost efficiency of work accomplished to date.
CPI = EV/AC
Scheduling Performance Index (SPI)
Measures scheduling efficiency
SPI = EV/PV
Percent Complete Indexes
Indicates how much of the work accomplished represents of the total budgeted
(BAC) and actual (AC) dollars to date.
PCIB = EV/BAC
PCIC = AC/EAC
Interpretation of Indexes Example

Immediate predecessor
Task No Task Name Duration, days Task Name Task No
1 Start 0 - -
2 A 2 Start 1
3 B 3 Start 1
4 C 4 A 2
5 D 1 C 4
Project
6 E 5 D 5
MS 7
8
F
Finish
6
0
B
E,F
3
6,7
Project
In MS Project-
Exercise
Task No is automatic, like row nos in Excel
Enter Task No, not task name, of the predecessor task
Draw network diagram

Management
Draw Gantt chart
L E C T U R E - 1 4 , 2 2 O C T O B E R 2 0 1 6 S AT U R D AY, 4 - 6 P M
Get Calendar view
Get Early and Late start and finish dates, start slack, activity critical? FA C U LT Y: S A N D E E P K AYA S T H A , AT H Y D E R A B A D
Calendar standard: Saturdays and Sundays are holidays.
Auto schedule the tasks.
BITS-PILANI 3
MS Project Exercise Using MS Project

Outputs of the exercise are in next 4 slides. Download MS Project 60-day free trail version
The screenshots added later, not shown during the lecture. from Microsoft website
Buy the license
BITS-PILANI 4 BITS-PILANI 2
Calendar view Gantt chart
ES/EF/LS/LF, (start slack),

critical? Network diagram
Two approaches to estimate
time and costs
Top-down (macro) estimates:
Bottom-up (micro) estimates:
Estimating Project
Times and Costs
CHAPTER-5
Macro (Top-down) Approaches Why estimate time and cost?

Consensus methods To schedule work.
Ratio methods To determine how long the project should take and its cost.
To determine whether the project is worth doing.
Apportion method
To develop cash flow needs.
Function point methods for software projects To determine how well the project is progressing.
Learning curves To develop time-phased budgets and establish project
baseline.
Support good decisions.
ES/EF/LS/LF, (start slack), critical? (complete
set of slides of the MS Project exercise are in
Lecture-14 slides) Apportion Method
Estimating Project Project

Times and Costs Management
CHAPTER-5
L E C T U R E - 1 5 , 2 3 O C T O B E R 2 0 1 6 S U N D AY, 4 - 6 P M
BITS-PILANI 3
Macro (Top-down) Approaches Why estimate time and cost?
Consensus methods To schedule work.
Ratio methods To determine how long the project should take and its cost.
To determine whether the project is worth doing.
Apportion method
To develop cash flow needs.
Function point methods for software projects To determine how well the project is progressing.
Learning curves To develop time-phased budgets and establish project
baseline.
Support good decisions.
Two approaches to estimate

Apportion Method time and costs
Top-down (macro) estimates:
Bottom-up (micro) estimates:
Simplified Basic Function Point Count Process
Micro (Bottom-up) Approaches for a Prospective Project or Deliverable
Template method
Parametric Procedures Applied to Specific Tasks
Detailed Estimates for the WBS Work Packages
Phase Estimating: A Hybrid
Work package estimates Example: Function Point Count
Phase Estimating over Product
Refining Estimates Life Cycle
Reasons for Adjusting Estimates
Interaction costs are hidden in estimates.
Normal conditions do not apply.
Things go wrong on projects.
Changes in project scope and plans.
Adjusting Estimates
Time and cost estimates of specific activities are adjusted as the
risks, resources, and situation particulars become more clearly
defined.
Refining Estimates (contd) Level of Detail

Contingency Funds and Time Buffers Level of detail is different for different levels of management.
Are created independently to offset uncertainty.
Level of detail in the WBS varies with the complexity of the
Reduce the likelihood of cost and completion time overruns for a
project. project.
Can be added to the overall project or to specific activities or work Excessive detail is costly.
packages.
Insufficient detail is costly.
Can be determined from previous similar projects.
Changing Baseline Schedule and Budget

Unforeseen events may dictate a reformulation of the budget and
schedule.
Guidelines for estimating times,
Types of Costs costs, and resources
Direct Costs 1. People familiar with the tasks make the estimate.
Costs that are clearly chargeable to a specific work package.
Labor, materials, equipment, and other 2. Several people to make estimates.
Direct (Project) Overhead Costs 3. Base estimates on normal conditions, efficient methods, and a
Costs incurred that are directly tied to an identifiable project normal level of resources.
deliverable or work package. 4. Treat each task as independent, dont aggregate.
Salary, rents, supplies, specialized machinery
General and Administrative Overhead Costs

Organization costs indirectly linked to a specific package that are
apportioned to the project
Creating a Database for SB45 Support Cost Estimate

Estimating Worksheet
Estimating
Database
Templates
Disconnected 30 minutes
early at 5.30 pm due to
Internet connectivity Managing Risk
problem. Will continue in CHAPTER-7
the next session.

Risk Management Process

Risk
Project Uncertain or chance events that planning cannot overcome or

control.
Risk Management
Management A proactive attempt to recognize and manage internal events and

external threats that affect the likelihood of a projects success.
What can go wrong (risk event).
How to minimize the risk events impact (consequences).
L E C T U R E - 1 6 , 2 9 O C T O B E R 2 0 1 6 S AT U R D AY, 4 - 6 P M
FA C U LT Y: S A N D E E P K AYA S T H A , AT H Y D E R A B A D What can be done before an event occurs (anticipation).
What to do when an event occurs (contingency plans).
BITS-PILANI 21
The Risk Event Graph
Managing Risk
CHAPTER-7
FIGURE 7.1
Risk Managements Benefits Risk Management Process

A proactive rather than reactive approach. Risk
Reduces surprises and negative consequences. Uncertain or chance events that planning cannot overcome or
control.
Prepares the project manager to take advantage of appropriate risks.
Risk Management
Provides better control over the future.
A proactive attempt to recognize and manage internal events and
Improves chances of reaching project performance objectives within external threats that affect the likelihood of a projects success.
budget and on time.
What can go wrong (risk event).
How to minimize the risk events impact (consequences).
What can be done before an event occurs (anticipation).
What to do when an event occurs (contingency plans).
Managing risk
Step 1: Risk Identification
Step 2: Risk assessment
Step 3: Risk Response Development
The Risk
Step 4: Risk Response Control Management
Process
Managing risk Risk Breakdown Structure Project
Step 1: Risk Identification

Technical
Generate a list of possible risks through brainstorming, problem
identification and risk profiling. External Organisational Project Mgt
Macro risks first, then specific events

Requirements Subcontracting
and suppliers Product
Dependencies Estimating
Complexity and
Interfaces Regulatory
Resources
Planning
Quality
Market
Funding
Controlling
Performance and
Reliability Customer
Prioritisation
Communication
Technology
Weather
Partial Risk Profile for
Scenario analysis Product Development Project
Assessing the significance of each event in terms of-
Probability of the event
Impact of the event
Risk Severity
Risk value = Impact * Probability * Detection
Managing risk
Outcome-1
Event-1
Step 2: Risk assessment
Scenario analysis
Risk assessment matrix
Decision-1 Outcome-2 Failure Mode and Effects Analysis (FMEA)
Event-2
Probability analysis
Decision trees, NPV, and PERT
Semi-quantitative scenario analysis
Event-1
Outcome-3
Decision-2
Event-2
Decision taken first, event occurs later.
Event is uncertain
Outcomes depend both on decision and outcome
Outcome-4
Risk Severity Matrix Impact scales of a risk
Ranked scale: Very Low Low Moderate High Very High
Numerical scale: 1 2 3 4 5 6 7 8 9 10
Impact of flooding-
Cost 1 2 3 4 5 6 7 8 9 10
Time 1 2 3 4 5 6 7 8 9 10
Scope 1 2 3 4 5 6 7 8 9 10
Quality 1 2 3 4 5 6 7 8 9 10
Risk Assessment Form
Risk
Schedules
Risk Response Matrix Managing risk
Step 3: Risk Response Development
Mitigating Risk
Reducing the likelihood an adverse event will occur.
Reducing impact of adverse event.
Transferring Risk
Paying a premium to pass the risk to another party.
Avoiding Risk
Changing the project plan to eliminate the risk or condition.
Sharing Risk
Allocating risk to different parties
Retaining Risk
Making a conscious decision to accept the risk.
Risk and Contingency Planning Contingency Planning

Technical Risks Contingency Plan
Backup strategies if chosen technology fails.
An alternative plan that will be used if a possible foreseen risk event
Assessing whether technical uncertainties can be resolved. actually occurs.
Schedule Risks A plan of actions that will reduce or mitigate the negative impact
Use of slack increases the risk of a late project finish. (consequences) of a risk event.
Imposed duration dates (absolute project finish date)
Risks of Not Having a Contingency Plan
Compression of project schedules due to a shortened project
duration date. Having no plan may slow managerial response.
Decisions made under pressure can be potentially dangerous and
costly.
Contingency Fund Estimate Risk and Contingency Planning
(000s) (contd)
Costs Risks
Time/cost dependency links: costs increase when problems take
longer to solve than expected.
Deciding to use the schedule to solve cash flow problems should be
avoided.
Price protection risks (a rise in input costs) increase if the duration
of a project is increased.
Funding Risks
Changes in the supply of funds for the project can dramatically
affect the likelihood of implementation or successful completion of a
project.
Contingency Funding and

Managing risk Time Buffers
Step 4: Risk Response Control Contingency Funds
Risk control Funds to cover project risksidentified and unknown.
Size of funds reflects overall risk of a project
Execution of the risk response strategy
Budget reserves
Monitoring of triggering events
Are linked to the identified risks of specific work packages.
Initiating contingency plans
Management reserves
Watching for new risks Are large funds to be used to cover major unforeseen risks (e.g., change in project
scope) of the total project.
Establishing a Change Management System
Monitoring, tracking, and reporting risk Time Buffers
Fostering an open organization environment Amounts of time used to compensate for unplanned delays in the
Repeating risk identification/assessment exercises project schedule.
Assigning and documenting responsibility for managing risk
Change Management Control
Sources of Change
Project scope changes
Implementation of contingency plans Change Request
Improvement changes Form
Change Management Control

The Change Control Process
Identify proposed changes.
List expected effects of proposed changes on schedule and budget.
Review, evaluate, and approve or disapprove of changes formally. Change Request
Log
Negotiate and resolve conflicts of change, condition, and cost.
Communicate changes to parties affected.
Assign responsibility for implementing change.
Adjust master schedule and budget.
Track all changes that are to be implemented
Outsourcing: Managing The Change Control Process
Inter-organisational
Relations
CHAPTER-15
OUTSOURCING PROJECT Benefits of a Change Control

WORK System
Advantages Disadvantages 1. Inconsequential changes are discouraged by the formal process.
Cost reduction Coordination breakdowns 2. Costs of changes are maintained in a log.
Faster project completion Loss of control 3. Integrity of the WBS and performance measures is maintained.
High level of expertise Interpersonal conflict 4. Allocation and use of budget and management reserve funds are
tracked.
Flexibility Security issues
5. Responsibility for implementation is clarified.
Political hot potato
6. Effect of changes is visible to all parties involved.
7. Implementation of change is monitored.
8. Scope changes will be quickly reflected in baseline and
performance measures.
1233 BITS-PILANI 31
PROCUREMENT MANAGEMENT
TYPES OF CONTRACTS PROCESS
Fixed-Price (FP) Contract 1. Planning purchases and acquisitions
or Lump-sum Agreement
2. Planning contracting
The contractor with the lowest bid agrees to perform all work specified in the
contract at a fixed price. 3. Requesting seller responses
The disadvantage for owners is that it is more difficult and more costly to prepare. 4. Selecting sellers
The primary disadvantage for contractors is the risk of underestimating project
costs. 5. Administering the contract
Contract adjustments: 6. Closing the contract
Redetermination provisions
Performance incentives
1236 1234
TYPES OF CONTRACTS
(CONTD)
CONTRACT
Cost-Plus Contracts A formal agreement between two parties wherein the contractor
obligates itself to perform a service and the client obligates itself to
The contractor is reimbursed for all direct allowable costs (materials, labor, travel) do something in return.
plus an additional prior-negotiated fee (set as a percentage of the total costs) to
cover overhead and profit. Defines the responsibilities of the parties, spells out the conditions of
its operations.
Risk to client is in relying on the contractors best efforts to contain costs.
Defines rights of the parties to each other.
Controls on contractors:
Grants remedies to a party if the other party breaches its transactional
Performance and schedule incentives obligations.
Costs-sharing clauses
1237 1235
CONTRACT TYPE VERSUS RISK
Project
Management
L E C T U R E - 1 7 , 1 N O V E M B E R 2 0 1 6 T U E S D AY, 7 - 9 P M
BEST PRACTICES IN OUTSOURCING

PROJECT WORK
Well-defined requirements and procedures.
Extensive training and team-building activities.
Well-established conflict management processes in place.
Project Closure
Frequent review and status updates.
Co-location when needed.
Fair and incentive-laden contracts.
CHAPTER- 14 Long-term outsourcing relationships.
BITS-PILANI 2
Close-out Plan Types of Project Closures
What tasks are required to close the project? Normal
Who will be responsible for these tasks? Premature
Failed Project
When will closure begin and end?
Changed Priority
How will the project be delivered? Perpetual
Wrap up closure activities Project Closure Deliverables

Getting delivery acceptance from the customer Wrapping up the project
Shutting down resources and releasing to new users Facilities, Customer, Vendors, Report
Reassigning project team members Evaluation of performance and management of the project
Closing accounts and ensuring payment of bills Team evaluation
Individual evaluation
Delivering the project to the customer
Creating a final report
Retrospectives- lessons learned
Facilitator, Managing, Utilization, Team
Retrospectives A Project
Lessons Learned
Closure
An analysis carried out during and shortly after the project life cycle
to capture positive and negative project learningwhat worked and
Checklist
what didnt?
Goals of Retrospectives
Reuse learned solutions
Avoid repetitive mistakes
The Final Report

Executive Summary Recommendations
International
Project goals met/unmet Technical improvements
Stakeholder satisfaction Corrective actions
with project
User reactions to quality Lessons Learned
Projects of deliverables
Analysis
Project mission and objective
Reminders
Retrospectives
Procedures and Appendix

CHAPTER-15 Backup data
systems used
Organization resources Critical information
used
ENVIRONMENTAL FACTORS Types of International projects
Legal/Political Domestic
Political stability
National and local laws and regulations Overseas
Government, state and local bureaucracies Foreign
Government interference or support
Government corruption Global
Security
International terrorism
National and local security
Local crime and kidnapping
Risk management
ENVIRONMENTAL FACTORS FACTORS AFFECTING INTERNATIONAL PROJECTS

(CONTD)
Geography
Climate and seasonal differences
Natural obstacles
Economic
Balance of payments
Inflation rates
Protectionist strategies and policies
Currency convertibility and exchange rates
Local labor force: supply, educational and skill levels
International assignments ENVIRONMENTAL FACTORS
(CONTD)
Positives Negatives Infrastructure

Telecommunication networks
Increased income Absence from home and Transportation systems
friends, and family
Increased responsibilities Power distribution grids
Personal security risks Unique local technologies
Career opportunities
Educational systems
Missed career opportunities
Foreign travel
Culture
Difficulties with foreign
New lifetime friends Customs and social standards
language, culture, and laws
Values and philosophies
Language
Multicultural environments
CROSS-CULTURAL CONSIDERATIONS: ASSESSMENT MATRIX

A CLOSER LOOK PROJECT SITE SELECTION
Culture
A system of shared norms, beliefs, values, and customs
that bind people together, creating shared meaning and a
unique identity.
Cultural Differences:
Geographic regions
Ethnic or religious groups
Language
Economic
SELECTION AND TRAINING FOR
INTERNATIONAL PROJECTS CROSS-CULTURAL CONSIDERATIONS
(CONTD)
Working in
France
Working in the Working in
Areas for Training to Increase Understanding of a United States China
Foreign Culture:
Religion
Dress codes
Education system
Holidaysnational and religious
Working in
Daily eating patterns Mexico
Family life
Business protocols Working in
Saudi Arabia
Social etiquette
Equal opportunity
SELECTION AND TRAINING FOR

INTERNATIONAL PROJECTS
Selection Factors
Work experience with cultures other than ones own
Previous overseas travel
Project Oversight
Good physical and emotional health
Knowledge of a host nations language
Recent immigration background or heritage
CHAPTER-16 Ability to adapt and function in the new culture
IMPORTANCE OF OVERSIGHT
TO THE PROJECT MANAGER PROJECT OVERSIGHT
Oversight Functions: Project Oversight
Providing support and help to the project manager where needed. A set of principles and processes to guide and improve the
Determining the environment in which the project manager will implement his management of projects.
or her project.
Influence the performance measures used to hold the project manager
Oversights Purposes:
responsible and accountable. To ensure projects meet the organizational needs for standards,
Providing the oversight group to which the project manager will reporting at procedures, accountability, efficient allocation of resources, and
predetermined phases in the project. continuous improvement in the management of projects.
To support the project manager.
KEY RESPONSIBILITIES OVERSIGHT ACTIVITIES

Senior executive oversight committee At the Organization Level At the Project Level
Project selection. Review projects objectives.
Reviews project options available by type (new,
operational, compliance) Portfolio management. Decide on issues raised by the
project manager.
Confirms business case and linkage to organizational Improving how all projects are
managed over time. Track and assist the project to
strategy resolve bottlenecks.
Assessing and elevating the
Selects, prioritizes, and balances the overall risk of all maturity level of the Review status reports from the
project manager.
organizational projects organizations project
management system. Audit and review lessons learned.
Ensures availability of resources and competencies
Using balanced scorecard Authorize major deviations from
Sets macro time, cost, and requirements approach to review progress on the original scope.
Reviews gating outcomes strategic priorities. Cancel the project.
BITS-PILANI 26 BITS-PILANI
1624
PROJECT PORTFOLIO COST SUMMARY REPORT
FOR TOP MANAGEMENT
FIGURE 16.1
BITS-PILANI 28
PROJECT PORTFOLIO SCHEDULE SUMMARY REPORT FOR

PROJECT SCHEDULES
FIGURE 16.2
BITS-PILANI 29
Year(X) Demand(Y) XY X^2 30
1993 10 19930 3972049

1994 13 25922 3976036
25
1995 14 27930 3980025
1996 17 33932 3984016
Deamnd(Thousandunits)
1997 18 35946 3988009 20
1998 18 35964 3992004
1999 19 37981 3996001
2000 20 40000 4000000 15
2001 22 44022 4004001
2002 23 46046 4008004
2003 22 44066 4012009 10
2004 24 48096 4016016

2005 24 48120 4020025
5
2006 25 50150 4024036
Sum 27993 269 538105 55972231 0

Average 1999.50 19.21 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
b= 1.052747
a= 2085.754
Forecast 2007 27.11

Forecast 2008 28.16
Period Sales MA(4) MA(6) 37.00
1 28.00
35.00
2 29.00
3 28.50 33.00
4 31.00
Sales
31.00
5 34.20 29.1
6 32.70 30.7 29.00
7 33.50 31.6 30.6
27.00
8 31.80 32.9 31.5
9 31.90 33.1 32.0 25.00
10 34.30 32.5 32.5 1 2 3 4 5 6 7 8 9 10 11 12 13
11 35.20 32.9 33.1 Period
12 36.00 33.3 33.2
13 34.4 33.8 Sales MA(4) MA(6)
3
alpha=0.2 alpha=0.4 36.00
Period Sales F(t),0.2 Error^2 F(t),0.4 Error^2
34.00
1 28.00 29.00 1.000 29 1.0
2 29.00 28.80 0.040 28.60 0.2 32.00
3 28.50 28.84 0.116 28.76 0.1 30.00
4 31.00 28.77 4.964 28.66 5.5
Sales
28.00
5 34.20 29.22 24.824 29.59 21.2
6 32.70 30.21 6.180 31.44 1.6 26.00
7 33.50 30.71 7.777 31.94 2.4 24.00
8 31.80 31.27 0.282 32.57 0.6
22.00
9 31.90 31.38 0.275 32.26 0.1
10 34.30 31.48 7.951 32.12 4.8 20.00
1 2 3 4 5 6 7 8 9 10 11 12
11 35.20 32.04 9.959 32.99 4.9
12 32.68 33.87 Sales F(t),0.2 F(t),0.4
Mean,MSE 5.761 3.849
F(1)=29.00isassumed
Paybackperiod
Example1
AfterYear 0 1 2 3 4 5 6 7 8
NetCashFlow 100 20 30 40 50 60 70 80 80
CumulativeNetCashFlow 100 80 50 10 40 100 170 250 330
Example2
AfterYear 0 1 2 3 4 5 6 7 8
NetCashFlow 100 200 30 40 50 60 70 80 80
Paybackperiod
Example1
AfterYear 0 1 2 3 4 5 6 7 8
NetCashFlow 100 20 30 40 50 60 70 80 80
Example2
AfterYear 0 1 2 3 4 5 6 7 8
NetCashFlow 100 200 30 40 50 60 70 80 80
Principal,Rs 100 Year Amount,Rs
Interestrate,fraction 0.1 0 100 Amount
1 110 800
2 121 700
3 133 600
4 146 500
5 161
Rs
400
6 177
300
7 195
200
8 214
100
9 236
10 259 0
0 1 2 3 4 5 6
11 285
12 314
13 345
14 380
15 418
16 459
17 505
18 556
19 612
20 673
tinbankafter't'years
6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
Amountinvested,Rs 100
Interestrate 20%
Futurevalue
AfterYear> 0 1 2 3 4 5 6 7
Interestrate(0%) 100 100 100 100 100 100 100 100
Interestrate(10%) 100 110 121 133.1 146.4 161.1 177.2 194.9
Interestrate,0.2*100% 100 120 144.0 172.8 207.4 248.8 298.6 358.3
500
400
Amount
300
200
100
0
0 1 2 3 4 5 6 7
Year
Interestrate(0%) Interestrate(10%) Interestrate,0.2*100
8
100
214.4
430.0
7 8
%
Amountreceivedinfuture,Rs 100
Discountrate 15%
Presentvalue
AfterYear> 0 1 2 3 4 5 6 7
Discountrate(0%) 100 100 100 100 100 100 100 100
Discountrate(10%) 100.0 90.9 82.6 75.1 68.3 62.1 56.4 51.3
Discountrate,0.15*100% 100.0 87.0 75.6 65.8 57.2 49.7 43.2 37.6
120
100
80
Amount
60
40
20
0
0 1 2 3 4 5 6 7
Year
Discountrate(0%) Discountrate(10%) Discountrate,0.15*1
8
100
46.7
32.7
7 8
100%
Discountrate 0.1
ItemAfterYear> 1 2 3
Sales(000units) 400 440.0 484.0
UnitSellingPrice(Rs/unit) 5 5.2 5.4
Revenue(000Rs) 2000 2288.0 2617.5
UnitMaterialCost(Rs/unit) 2.5 2.6 2.7
UnitLabourCost(Rs/unit) 2 2.1 2.2
TotalVariableCost(Rs/unit) 1800 2048.2 2330.7
Contributionmargin(000Rs)=RevenueTotalVariableCo 200 239.8 286.8
PresentvalueofRevenues(000Rs) 1818.2 1890.9 1966.5

NetPresentValueofRevenues,usingtheNPVFormula 16753.1
PresentvalueofContributionmargin(000Rs) 181.8 198.2 215.5

NetPresentvalueofContributionMargin,usingtheNPVformu 1967.9
4 5 6 7 8 Increase,%pa
532.4 585.6 644.2 708.6 779.5 10%
5.6 5.8 6.1 6.3 6.6 4%
2994.4 3425.6 3918.9 4483.2 5128.8
2.7 2.8 2.9 3.0 3.1 3%
2.2 2.3 2.4 2.5 2.6 4%
2652.2 3018.1 3434.6 3908.6 4448.2
342.2 407.5 484.3 574.6 680.6
Sum
2045.2 2127.0 2212.1 2300.6 2392.6 16753.1
233.7 253.0 273.4 294.8 317.5 1967.9

InternalrateofReturn(IRR)
Example1
AfterYear> 0 1 2 3 4 5
NetCashFlow 100 20 30 40 50 60
IRR,usingExcelformula 36.5%
Example2
AfterYear> 0 1 2 3 4 5
NetCashFlow 100 200 30 40 50 60
IRR,usingExcelformula 6.7%
6 7 8
70 80 80
6 7 8
70 80 80
PlannedSchedule
Month
Activity 1 2 3 4 5 6 7 8 9 10
Today
PlannedSchedule
PlannedandActuaScheduleattheendofMonth5 AttheendofMonth
Month Statusofactivities
Activity 1 2 3 4 5 6 7 8 9 10 Start Completion
A
Ontime Ontime,completed
B
Ontime Late,completed
90%workcomplete
C
10%workremaining Ontime Inprogress
60%workcomplete
D
40%workremaining Late Inprogress,Delayed
E
Early Early,completed
F
Notstarted Delayed
G
Notstarted Delayed
Today PlannedSchedule Overallproject

ActualScheduleCompleted DelayedorEarly?
ActualScheduleTobecompleted
PlannedandActuaScheduleandCostsattheendofMonth5 AttheendofMonth
Month Cost StatusofCostsofactivities
Plannedtil Actualtill
Activity 1 2 3 4 5 6 7 8 9 10 Month10 Month5
10
A
10 Actual=10,Planned=10,Costsame
15
B
25 Actual=25,Planned=15,Costoverrun
30 90%workcomplete
C
10%workremaining 20 Actual=20,Planned=0.90*30=27,Costunderru
30 60%workcomplete
D
40%workremaining 10 Actual=10,Planned=0.60*30=18,Costunderru
15
E
10 Actual=10,Planned=15,Costunderru
10
F
Planned=10
20
G
Planned=20
Today Planned Overallproject

Completed Costoverrunorunderrun?
Tobecompleted
PlannedSchedule
Month Cost
Activity 1 2 3 4 5 6 7 8 9 10 nedtillMonualtillMonth
D
D
PlannedScheduleandPlannedCos
Month Cost
Plannedtil Actualtill
Activity 1 2 3 4 5 6 7 8 9 10 Month10 Month5
3 7 10
A
5 10 15
B
10 5 5 10 30
C
20 5 5 30
D
10 5 15
E
6 3 1 10
F
4 4 12 20
G
130
Month 1 2 3 4 5 6 7 8 9 10
Sum 23 18 17 25 17 5 20 5 0 0
Cumulative 23 41 58 83 100 105 125 130 130 130 BCWS
CumulativeCostorBCWS
150
100
50
0
1 2 3 4 5 6 7 8 9 10
ActualScheduleandActualCost
Month Cost
Activity 1 2 3 4 5 6 7 8 9 10 nedtillMonualtillMonth
A
5 5 10
B
10 10 5 25
C
12 8 10%remaining 20
D
1 1 4 4 40%remaining 10
E
7 3 10
75
Month 1 2 3 4 5 6 7 8 9 10
Sum 5 6 18 29 17
Cumulative 5 11 29 58 75 ACWP
CumulativeCostorACWP
80
60
40
20
0
1 2 3 4 5 6 7 8 9 10
BCWSandACWP
140
120
100
80
60
40
20
0
1 2 3 4 5 6 7 8 9 10
AttheendofMonth
Plannedtil Actualtill %work
Activity 1 2 3 4 5 6 7 8 9 10 Month10 Month5 completed PV EV AC CV SV Schedule Cost
3 7 10 10 10 10 0 0 Same Same
A
5 5 10 100
5 10 15 15 15 25 10 0 Same Overrun
B
10 10 5 25 100
10 5 5 10 30 15 27 20 7 12 Underrun Underrun
C
12 8 10%workremaining 20 90
20 5 5 30 30 18 10 8 12 Overrun Underrun
D
1 1 4 4 40%workremaining 10 60
10 5 15 0 15 10 5 15 Underrun Underrun
E
7 3 10 100
6 3 1 10 10 0 0 0 10 Overrun
F
0
4 4 12 20 20 0 0 0 20 Overrun
G
0
Project 100 85 75 10 15 Overrun Underrun
Today
PV:PlannedValue CV:CostVariance,CV=EVAC
EV:EarnedValue SV:ScheduleVariance,SV=EVPV
AC:ActualCost
Overallproject
Delayed(overrun)
Costunderrun(lessthanbudget)
Chapter8:ResourceConstrainedExample
Ganttchartofaproject,forES/Efschedule
Week
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Workmen Critical?
A 2 Y
B 3 Y
C 4 Y
D 1 Y
E 4 N
F 6 N
G 3 N
H 3 N
Maximumnumberofworkmenthatwillbeavailableinaweek10
Developaschedulethatdoesnotrequiremorethan10workmeninanyweek.
ResourcerequirementforSchedule1:ES/EF
Week
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14
A 2 2 2 2 2
B 3 3 3 3
C 4 4 4
D 1 1
E 4 4 4
F 6 6
G 3
Total 2 6 6 6 8 12 6 3 3 4 4 7 1 1 69 4.93 8.99 12
12 ResourcerequirementforSchedule1:ES/EF
10
ResourcerequirementforSchedule2:LS/LF
Week
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14
A 2 2 2 2 2
B 3 3 3 3
C 4 4 4
D 1 1
E 4 4 4
F 6 6
G 3
Total 2 2 6 6 6 3 3 6 12 10 4 4 4 1 69 4.93 9.46 12
12 ResourcerequirementforSchedule2:LS/LF
10
ResourcerequirementforSchedule3.ActivityFisstarted1weekafterES/EFschedule.
Week
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14
A 2 2 2 2 2
B 3 3 3 3
C 4 4 4
D 1 1
E 4 4 4
F 6 6
G 3
Total 2 2 6 6 6 9 9 6 6 4 4 4 4 1 69 4.93 5.76 9
12 ResourcerequirementforSchedule3.ActivityFisstarted1weekafterES/EFschedule.
10
ResourcerequirementforSchedule4.ActivityHisstarted1weekafterES/EFschedule.
Week
Activity 1 2 3 4 5 6 7 8 9 10 11 12 13 14
A 2 2 2 2 2
B 3 3 3 3
C 4 4 4
D 1 1
E 4 4 4
F 6 6
G 3
Total 2 6 6 6 8 9 6 6 3 4 4 4 4 1 69 4.93 4.84 9
12 ResourcerequirementforSchedule4.ActivityHisstarted1weekafterES/EFschedule.
10
SumaryofResourcerequirement
8 Total Average Variance Maximum
Schedule1ES/EF 69 4.93 8.99 12
6 Schedule2LS/LF 69 4.93 9.46 12
Schedule3 69 4.93 5.76 9
4 Schedule4 69 4.93 4.84 9
2
Year0 Year1 Year2
Outlays(peryear) For
Preliminaryandpreoperativeexpenses 2 ProjectImplementationagency
Fixedassets 20 20 10 Land,Building,Machinery
Currentassets 20 10 RM+WIP+FGinventory+Cash
Financing(peryear) From
ShareCapital 10 15 Ppromoters&Investors
TermLoan 15 15 7.5 Banks
Shorttermbankborrowing 12 6 Banks
Year0 Year1 Year2

ProjectedRevenueandCosts(peryear)
Sales 30 60 Give.=revenue*price
CostofCostofGoodsSold 30 40 =RM+Labour+utilities+Mktcosts+
Interest 4.8 6.4 Given:basedonloanstaken
Depreciation 2 2.8 Given:depreciationofassets
Projectedprofitandloss(peryear)
Sales1 30 60 fromabove
CostofGoodsSold2 30 40 fromabove
Interest3 4.8 6.4 fromabove
Depreciation4 2 2.8 fromabove
Lossesabsorbed5 0 6.8 fromrow8,ofpreviouscolumn
Profitbeforetax6=12345 6.8 4
Tax7=60%of6 0 2.4 Taxrate60%
Profitaftertax8=67 6.8 1.6 Profitbeforetaxtax
Year0 Year1 Year2

ProjectedCashFlow
SourcesofFunds
Shareissue 10 15 Given
ProfitBeforetaxandInterestaddedback 2 17.2 PBT+Interest
Depreciationprovision 2 2.8 Given
Increaseinsecuredmediumandlongtermborrowings 15 15 7.5 Given
Increaseinbankborrowingforworkingcapital 12 6 Given
Total 25 42 33.5 Totalofaboverows
Dispositionoffunds
Capitalexpenditurefortheproject 20 20 10 Given
Increaseincurrentassets 20 10 Given
Preliminaryandoperativeexpenses 2 0 0 Given
Taxes 0 0 2.4 FromProfitandLoss,row7
Total 22 44.8 28.8 Totalofaboverows
Openingbalanceofcash 0 3 0.2 Closingcashofpreviousyear
Netsurplus/deficit 3 2.8 4.7 TotalProjectedcashflowTotalDispositionoffunds
closingbalanceofcashinhandandatbank 3 0.2 4.9 Openingcash+Netsurplus/deficit
Year0 Year1 Year2

ProjectedBalanceSheet
Liabilities
Sharecapital 10 25 25 Add(subtract)tolastyear,valuesgiven
reservesandsurplus 0 0 1.6 Add(subtract)Profitaftertax
securedloan 0 0 0 Add(subtract)tolastyaer,valuesgiven
termloan 15 30 37.5 Add(subtract)tolastyear,valuesgiven
shorttermbankborrowing 12 18 Add(subtract)tolastyear,valuesgiven
Total 25 67 82.1
Assets
fixedassets 20 38 45.2 FAaddeddepreciation
currentassets
Cash 3 0.2 4.9 Closingbalance,Cashflowstatement
Othercurrentassets 20 30 Add(subtract)tolastyear,valuesgiven
miscellaneousexpenditureandlosses
preliminaryandpreoperativeexpenses 2 2 2 Add(subtract)tolastyear,valuesgiven
profitandlossaccountbalance 0 6.8 0 Add(subtract)Profitaftertax
Total 25 67 82.1
Principal 100
Interestrate,fraction 0.1
Year Amount
0 100
1 110
2 121
3 133 FuturevalueofRs100after't'years
4 146 800
5 161 700
6 177 600
7 195 500
8 214
Rs
400
9 236
300
10 259
200
11 285
100
12 314
13 345 0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
14 380
Year
15 418
16 459
17 505
18 556
19 612
20 673

Binder PM1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Binder PM1

Uploaded by

Copyright:

Available Formats

BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE, PILANI

WORK INTEGRATED LEARNING PROGRAMMES

Part A: Content Design

Course Objectives (CO)

1. Modern Project Management

Academic Term SECOND SEMESTER 2016-17

Contact hour 1-2

Contact hour 3-4

Contact hour 5-6

Contact hour 7-8

Contact hour 9-10

Contact hour 11-12

Contact hour 13-14

Contact hour 15-16

Contact hour 17-18

Contact hour 19-20

Contact hour 21-22

Contact hour 23-24

Contact hour 27-28

Contact hour 29-30

Contact hour 31-32

Important links and information:

Elearn portal: https://elearn.bits-pilani.ac.in

24 JULY 2016, SUNDAY, 4-6 PM

FACULTY: SANDEEP KAYASTHA, AT HYDERABAD

Keep the textbook with you during the lecture.

Type on chat now Project Management Software

Project Management textbook

Experiential Learning- 15%.

Mid Semester Examination- weightage-30%.

End Semester Examination- weightage- 45%.

Software development- for HR, Accounts, Maintenance Olympics/Commonwealth games

Project classification Project companies

Defining One Time Ongoing

Project Life Cycle What is a Project?

Notable characteristics of a project

The Project Life Cycle as used by a

FRR TESTING NITB

Extra slides- Not used in the Lecture

Construction Project Lifecycle Pharmaceuticals Project Lifecycle

MBAZG 523 PJM BITS-PILANI 24JUL2016 SUN 6-8 PM 129

The Project Manager

Must induce the right people at the right time to address

An integrative approach Project Management textbook

A portfolio management system Projects and strategy

Balancing the portfolio for

Non-financial strategic criteria

Sample questions in checklist method-1

Driver What business problem does the project solve?

Success metrics How will we measure success?

What is the impact of not doing this project?

What is the project risk to our organization?

Benefits, value, ROI When will the project show results?

Objectives What are the project objectives?

Resources Will internal resources be available for this project?

Approach Will we build or buy?

Schedule How long will this project take?

Schedule Is the time line realistic?

Training/resources Will staff training be required?

Finance/portfolio What is the estimated cost of the project?

Portfolio Is this a new initiative or part of an existing initiative?

Portfolio How does this project interact with current projects?

Technology Is the technology available or new?

Applying selection models

Straight line with cycles, y = a + b t + c Sin(d*t)